Secrecy Laws Are Changing Dramatically In China

Jiang Xinsheng, the former president of the China National Technical Import and Export Corp., was sentenced to 20 years in prison for leaking state secrets, two anonymous sources told Reuters on Sept. 28. It is unclear what Jiang is accused of stealing, but China watchers are following this case as a clue to how the new law on guarding state secrets, which goes into effect Oct. 1, will be implemented and what changes will come of it.

Jiang’s case began in 2004, when he was involved in negotiations to build new nuclear power plants in China. The China National Technical Import and Export Corp., the major state-owned enterprise responsible for handling high-tech imports, would have played an important role in any nuclear power plant negotiations. The company Jiang allegedly passed secrets to, French giant Areva, did not have its bid accepted when negotiations ended in 2006. His detention, exposed by Caijing magazine, began sometime in 2008. A Beijing court gave him the maximum sentence, suggesting Beijing plans a tougher stance on state secrets.

The more precise definitions of state secrets in the new law have not been made public, making it impossible to know how to avoid running afoul of the law. As local law enforcement and justice systems have an enormous amount of discretion and few checks on their prerogative, the only way to determine how authorities will interpret the law is to watch how they implement it on a case-by-case basis: Precedents set by cases will be much more important than what the law actually says.

By all accounts, Beijing recognised the need for such changes during the case of Stern Hu, a Chinese-born Australian national convicted of stealing commercial secrets. (Other Chinese-born foreign citizens have received similar treatment.) By April, the State Assets Supervision and Administration Commission, which oversees 120 major state-owned enterprises (SOE), had issued new regulations for handling state and commercial secrets until the new law went into effect. Under the reforms, any information held by an SOE that was not disclosed to the public could be considered a state secret. We expect the new law to be interpreted along the same trend line of greater secrecy and harsher penalties for violations.

As Jiang’s case illustrates, these efforts represent an attempt to deter domestic companies from sharing market-related or other information with foreign companies. As with other countries, Beijing has been quite protective of strategic sectors like energy, finance, communications, transport, etc. We can expect the first cases on this new law to emerge from these sectors.

The Danger of Photographing Military Sites

Four Japanese citizens and one Chinese citizen were arrested Sept. 20 in Shijiazhuang, Hebei province, for illegally videotaping a military site, Xinhua reported Sept. 23. The five individuals are all employees of Fujita Corp. and were doing a field survey in preparation for Fujita’s bid to build facilities in the area. Pursuant to the Chemical Weapons Convention, the Japanese government is contracting with firms for the disposal of chemical weapons shells left behind from World War II. Fujita was already involved in a similar facility built in Nanjing, and one company, Kobe Steel, already has a contract for the Shijiazhuang site.

The four Japanese citizens were held under “residential surveillance,” meaning they were likely staying in a hotel and being monitored by police while a decision was made in their case. (The Chinese employee’s status is unknown.) They could have been charged with espionage, but that would have been complicated given their legitimate purpose in Shijiazhuang. Old chemical weapons shells would not be out in the open, but rather at a secure facility. Assuming the plant to be built for the shells’ disposal is planned for nearby, any surveying would almost surely necessitate some videotaping of secure facilities.

The detention of the four is likely related to a heated Japanese-Chinese territorial dispute that flared up when Japanese authorities detained a Chinese fishing boat captain. The incident reflects the ability of the Chinese government to more strictly enforce its laws in times of heated nationalism, something of which businesses should be wary. Three of the four Japanese citizens were released Sept. 30 after they admitted to breaking the law and expressed regret. Diplomatic spats aside, this case brings to light security concerns for foreign companies operating in China. Most military or security-related installations are off-limits for photography or video surveillance to prevent espionage or other threats. Permission to survey such sites thus should be obtained in advance.

China Security Memo: Sept. 30, 2010

(click here to view interactive map)  


Sept. 23

  • Three hundred Christians protested the demolition of the Changchunli Church outside the Jinan municipal government offices in Shandong province, according to the U.S.-based Chinese news site The government had planned to relocate the church to a smaller site. About 200 police officers responded to the protest and reportedly injured 17 people.


Sept. 25

  • The chairman and the general manager of Anyuanding Security and Protective Technical Service Co. were detained by Beijing police for alleged involvement in illegal detentions and illegal business operations. The arrests came after significant media attention on Anyuanding’s detention activities, including special reports by Caijing and the Southern Metropolis Daily. The so-called black jails have been in existence in China since at least 2003 and this is the first time Chinese authorities have taken action on the issue.
  • A former Chongqing Public Security Bureau official was arrested Sept. 22 for working with gangs in the city, Chinese media reported. Between 2001 and 2006, he allegedly worked with gang leaders in Yubei district to cover up their crimes and help them avoid arrest. He reportedly accepted a large number of bribes in return, but the total amount of the bribes is unknown.
  • At least one household received a demolition notice with a bullet attached by plastic tape in Hohhot, Inner Mongolia province, according to an interview with the homeowner. The notice said that any one who disobeyed the government order would receive the bullet as a “gift.” The notice was placed in July and, except for the bullet, is typical practice when new developments are approved by the local government. The real estate company involved claimed it did not leave the notice, and police investigations have not found any suspects.


Sept. 26

  • The head of the Land Tax Bureau in Yangzhou, Jiangsu province, was sentenced to 13 years in prison. He accepted 10.9 million yuan (about $1.6 million) in bribes in return for undercharging three local companies 16.1 million yuan in taxes.
  • Explosions occurred at a factory near the Urumqi airport in Xinjiang province. A fire broke out at the Hengliji plastic plank factory next to the Urumqi Diwopu International Airport, with explosions heard around 11 p.m. local time that sent debris onto the airport premises. The airport was shut down temporarily and 11 flights were delayed. There have been no indications of foul play.
  • A gang leader and his associate were executed in Chongqing province. Both were sentenced to death for gang involvement, murder and drug trafficking in February, with appeals denied in May. They were arrested along with 32 other gang members in June 2009 as part of Chongqing’s vice crackdown.


Sept. 27

  • A woman was on trial in Erdos, Inner Mongolia province, for illegally collecting investments as part of a suspected pyramid scheme. The woman ran the Kaixing Zhicheng Trade Co. and collected 740 million yuan for real estate development from mostly elderly people and housewives. Around 400 million yuan is still missing.
  • Chinese media reported that millions of lost or stolen identification cards are sold online at an average price of 300 yuan each.
  • Eight people were arrested in Laibin, Guangxi province, for selling fake rabies vaccines, one of which resulted in the death of a four-year-old boy. About 1,200 doses of fake vaccine that had been sold for 330,000 yuan were recovered from clinics.
  • Seven local village officials were arrested for illegally attempting to disrupt a coal mine operation in Shouxian, Jiangsu province, Chinese media reported. The village director had been trying to set up a company to transport coal from a mine in neighbouring Litang, but could not work out an agreement with Litang Mining Industry Co. The village leaders then hired 200 villagers to protest the mining company for 20 yuan each per day in June 2009. The mining company was shut down for four days.
  • About 800 detonators were stolen from the Dahe coal mine in Zhangye, Gansu province. The police have yet to announce any leads or suspects.
  • Xinyi Zijin Mining, a subsidiary of the largest mining company in China, is being held responsible for a dam overflow Sept. 21 that killed 28 people in Xinyi, Guangdong province, provincial officials said. The new dam held tailings from a tin mine but overflowed after being hit by storms from Typhoon Fanapi. This is the second dam problem blamed on Zijin this year.
  • A court in Quanzhou, Fujian province, sentenced two people to death for organising a child trafficking network. Their group abducted 46 male infants from Sichuan, Yunnan and Guangxi provinces and sold them in the Quanzhou area for 30,000 to 40,000 yuan per child.


Sept. 28

  • About 300 elderly military veterans protested outside Guangdong provincial government offices in Guangzhou for better pensions. They complain that their pensions are only equal to or slightly more than those of laid off workers in the province. The protest comes at a time of heightened security in the area in preparation for the Asian Games.


Sept. 29

  • More than 20 people armed with iron bars raided a police station in Chengcheng, Shaanxi province, Sept. 22 to seize two suspects who had recently been arrested, Chinese media reported. The two were suspected of robbing graves classified as cultural heritage sites. Three policemen were injured in the raid. The three principal suspects in the raid and an unknown number of other suspects have been arrested.
  • A court in Dongguan, Guangdong province, gave five police officers sentences ranging from 9 to 18 months in jail for bribery and releasing a suspect. On Feb. 11, they accepted 50,000 yuan from a suspected drug dealer to release him from custody.
  • Jinan municipal police arrested 15 suspected members of a robbery gang in Shandong province. The group was involved in at least 280 robbery cases in which they would approach pedestrians on motorcycles or in cars and grab gold chains or other valuables.


*This report is reprinted with permission of STRATFOR. It may not be reprinted by any other party without express permission of STRATFOR.

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