News / Staff arrests increase company concerns over doing business in China

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International companies should be increasingly wary of the current atmosphere in China, after it changed its counter-espionage laws last year.

Arrests of workers at foreign firms in China are on the rise, adding to increasing concerns of western executives about continuing to run operations in the country.

In mid-February, The Guardian reported that China had arrested one of its citizens, Emily Chen, on spying charges after she spent four months in Nanjing last year helping a US logistics operator open an office in the region.

Ms Chen’s husband, a US citizen based in Doha, rejected the allegations and has been trying to raise funds for his wife’s legal fees, as she faces a 10-year sentence if convicted.

Details of her arrest were not immediately forthcoming: after flying into Nanjing Lukou airport in December, she disappeared, the authorities only informing her brother by letter four days later that she was being held in a detention centre in Dalian, some 570 miles away.

Nor is Ms Chen alone; last year Chinese authorities arrested a Japanese worker working for a Japanese company on similar grounds.

Like Ms Chen, the Japanese worker’s arrest appears to have occurred at an airport. Sources told a Taiwanese news outlet they now accompany colleagues due to fly out of the country on international flights. One noted: “We cannot stop the Ministry of State Security from making arrests, but at least we will know where they are.”

All the arrests are part of a Chinese government wider crackdown on purported spying, after it tightened its counter-espionage law last year. President of the US Chamber of Commerce in Shanghai, Eric Zheng, expressed concerns over the changes.

Mr Zheng said the law lacked “clear definitions… it will be impossible for foreign companies to engage in business activities in China”.

Similarly, president of the European Chamber Jens Eskelund said the Chinese authorities were giving mixed messages on their intended direction of travel, and that foreign businesses “needed answers”.

He added: “Will China focus on self-reliance, tightening regulations on the basis of security concerns, or does it intend to follow through on its market-opening promises?”

Even before news of the arrests had begun filtering out, US firms were already voting with their feet. An annual US-China Business Council survey in June noted that 35% of respondents had cut or paused Chinese investment in the preceding 12 months.

Representing a 22% increase on 2022, 73% cited costs and uncertainties around geopolitical tensions; a poll of US textile firms found 61% no longer used China as their top supplier.

Responding to the increasing threat of arrest, the professor of politics and international studies at the International Christian University, Stephen Navy, told Germany’s Deutsche Welle he and colleagues who had worked in China were “reluctant” to return.

He expressed particular concern over “even the most insignificant and irrelevant things being seen as some form of espionage”.

Chinese commentator Heng He, however, told New Tang Dynasty Television the recent series of raids and arrests was a “signal sent to foreign companies…if they want to operate in China, they must be obedient and have self-control”.

But with the likes of India, Mexico and a host of South-east Asian nations willing to fill the breach, can China afford such aggressive posturing? It seems a question China has yet to answer. Premier Li Qiang told the China International Supply Chain Expo in Beijing late last year that the international community needed to rebuff “the rise of global protectionism”.

His comments followed moves by the US government to repatriate manufacturing – in particular of electric vehicles – as it looks to diminish its reliance on China.

Mr Li said: “The international community must be more wary of the challenges and risks brought about by protectionism and uncontrolled globalisation. China is a participant and beneficiary of industrial and supply chain cooperation, but also a firm defender and builder.

“We are willing to build closer production and industrial supply chain partnerships with all countries.”

Countries, maybe. But it is companies – and more importantly their staff – that are taking all the risk.

If you have any experience of this, or concerns about staff in China please contact the writer at [email protected].