China's sweeping national security law sparks uncertainty for foreign firms
German envoy warns of legal uncertainty and hurdles to investment
The mainland's sweeping national security law and a series of related laws in the making have created legal uncertainty for foreign companies and new hurdles for their investment, said Michael Clauss, the German ambassador to China.
The European Union delegation to China sought clarification over the definition of national security and suggested specific changes in five pages of feedback on the draft of the new national security legislation during its public consultation.
"But none of [the changes] has been taken up," Clauss said in an interview with the .
His remarks came after the National People's Congress passed a sweeping and controversial national security law on July 1 that defined any threat to the state's power, sovereignty, or the sustainable growth of the economy as a threat to national security.
The new law said that China would introduce a vetting scheme to scrutinise any foreign investment that posed a risk to national security.
Beijing is also deliberating at least three other related, but more detailed, laws on foreign investment, cyber security, and foreign NGOs.
Foreign companies feared the laws might be used to keep certain overseas competitors to Chinese companies out of the market because the definition of national security was so broad and vague that any business activity could be subject to it, Clauss said.
"In China the notion of national security [covers] a very wide range - from culture, technology, food safety up to religion. You can hardly find a field that is not relevant to national security concerns."
Foreign countries including Germany also have a national security law. But in Germany the definitions were very limited and legally clear, and foreign companies could take the government to court in case they felt discriminated against, he said.
The embassy has not heard from companies about plans to scale down their investment due to the laws. "But many investors are aware of the risks," Clauss said. "The security laws and the way they are implemented will have an influence on investment decisions."
The revision of the foreign investment law, to be introduced by the Ministry of Commerce, was a particular source of concern for foreign companies, he said.
The draft stipulates that anybody, including a competitor of a German or European company, can ask the authorities to screen whether their rivals' investment would sabotage national security.
Foreign investors would have to ask the Chinese authorities in advance if their investments were in line with China's national security, according to the draft.
"This would mean that a new hurdle for foreign investment would be created," Clauss said.
The draft of the cybersecurity law, which could lead to slower internet connections and disclosure of source codes, also adds to the foreign companies' concerns about their business in China.
"Building a cyber firewall ever higher would hamper business and make innovation much more difficult," Clauss said. "National security concerns should not hamper cooperation on innovation."
He said Berlin had addressed its concerns to Lu Wei, the minister of the Cyberspace Administration of China, at a recent meeting in Germany, and would like to continue such bilateral dialogue.
