China: Message From The Revisions To The Law On Guarding State Secrets

On February 27, 2014, the Standing Committee of the National People's Congress of the People's Republic of China enacted the Amended Law on the Protection of State Secrets (the "Revised Law"). The Revised Law will take effect on May 1, 2024. This is the second revision since the original promulgation of the Law in 1988.

Compared to the last revision in 2010, the revisions made in the Revised Law are relatively insubstantial. The purposes of the revisions are to identify the political leadership of the work on protecting state secrets, to simplify the determination of state secrets, and to strengthen the protection of state secrets by the government agencies, organizations, and institutions possessing state secrets. In this brief article, we will highlight only the revisions that are worthy of attention by foreign-invested companies.

Working Organization or Dedicated Person

Article 8 of the Revised Law adds that administrative bodies and entities that have access to state secrets (for the purpose of this article, the "Entity" or "Entities") should establish a work organization or designate specific personnel to take charge of the work of state secrets protection in accordance with the requirements of the law. This is not a new obligation. Article 6 of the existing Regulation on the Implementation of the Law on the Protection of State Secrets, which took effect on March 1, 2014, already imposes such an obligation.

Due to the foreign investment review process, most foreign-invested companies are unlikely to be Entities under the Revised Law. To the most, most foreign-invested companies may only be recipients of limited state secrets shared from their businesses with the administrative agencies or Entities. Even in such a situation, foreign-invested companies will not become an Entity subject to the heavy obligations of state secret protection, as the Revised Law draws a clear line between Entities and non-entities and imposes different obligations on them.

Determination of State Secrets

The revisions made to Articles 15 to 25 of the Revised Law atempts to simplify and clarify the determination of state secrets.

The Revised Law does not change the general scope and types of state secrets information. It changes the authority to determine the specific state secret information and adds the general principle for determination of state secrets:

• In the past, the National Administration of State Secret Protection (the "State Secrets Protection") had to determine the state secrets together with other central government agencies. The Revised Law empowers the State Secrets Protection alone to determine state secrets alone or together with other central government agencies. This will increase the efficiency of determining whether a certain piece of specific information is a state secret, but it also gives more arbitrary power to the State Secrets Protection and highlights the importance to keep necessary communication with it when there is doubt.
• Interestingly, the Revised Law now provides that determination of state secrets must be subject to the following principles:

The above new provision seems adding clarity and certainty in the used-to-be mysterious determination. Whether it will have such effect is a fact we need to find out from future practice.

• The Revised Law clarifies that the person responsible and liable for the state secrets should be the head of a government agency or the legal representative of an Entity. It highlights the personal liabilities, which foresees the potential escalation of protection measures by the government agencies and Entities. It could be a good change for the foreign invested companies though, as foreign invested companies were in many occasions puzzling at whether they were transferred state secrets. The escalation of protection measures on the other side may solve the puzzles.
• In addition to the existing mechanism for determining the types of state secrets, the Revised Law newly allows the State Secrets Protection to delegate the work to determine of state secrets types to designated state secrets guardians, i.e. the relevant government agencies and Entities.
• Although Article 18 of the Revised Law provides for the derivative determination of state secrets for the first time, a more detailed administrative regulation issued by the State Secrets Protection has been in force since April 1, 2023, laying out the great details of it.
• Another improvement of the Revised Law is that it allows the key points of each identified state secret to be marked on a voluntary basis. Without the key points, all contents related to the identified state secrets could arguably be claimed as state secret information. Although marking the key points is not mandatory, the Revised Law does allow it as a friendly option. We just need to watch whether marking key points will become the mainstream practice next.
• The Revised Law expands the medium (including electronic files and other new types of medium) containing state secrets that should be marked as state secrets to include electronic files. Foreign-invested companies that have access to state secrets should be aware of such a change and create or handle the state secrets in the form of an electronic file in full compliance with the requirement for the protection of state secrets.
• Another positive change of the Revised Law is that it stipulates that state secrets should be reviewed on an annual basis to determine whether they should remain as state secrets. Previously, the review was conducted on a vague "timely" basis. Foreign-invested companies with access to state secrets should have a mechanism to check the status of state secret information they received accordingly with the sharing government agencies and Entities.

Protection Requirements

Most of the changes in this areas to the provisions on protection of state secrets in the Revised Law are to clarify or align state secret protection with the regulations under other relevant laws.

• The Revised Law now permits the transmission of state secrets through the internet, other public information networks and wired and wireless communications, provided that the transmission is subject to the protective measures in accordance with the rules and standards for the protection of state secrets. Therefore, if foreign-invested companies need or are required to transmit state secrets online, they should communicate with the sharing government agencies and Entities about the online transmission requirements in advance.
• The Revised Law requires that all companies (including foreign-invested companies) engaged in businesses involving state secrets (including the purchase of products and services related to state secrets) should have appropriate protection capabilities and comply with the protection rules. Therefore, if the businesses conducted by the foreign-invested companies involve state secrets or if there is doubt about it, the foreign-invested companies need to verify with the counterparty at the outset whether state secrets are involved and what the requirements are, then enter into a specific agreement for the protection of state secrets.

Based on our review, the Revised Law do not dramatically change the existing state secrets protection mechanism and impose substantial obligations on foreign-invested companies. Therefore, the Revised Law is not a new amendment that poses a greater threat or concern to foreign-invested companies.

Due to the national security review of foreign investment in China, foreign-invested companies mostly operate outside the realm of the state secrets and are unfamiliar with the determination and protection of state secrets. It also means that the Chinese State Secret Protection are unfamiliar with the proper interaction with the foreign invested companies. Such a fact causes misunderstanding and misjudgment in some circumstances by both foreign-invested companies and the Chinese law enforcement agencies, especially with the ongoing overheated geopolitical interactions. To address such concern and mitigate the relevant risks, foreign-invested companies are advised to seek legal advice from competent legal counsels to familiarize themselves with the state secrets protection so as to make smart plans to comply with China's state secret protection.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.