Skip to main content

Are you a legal professional? Visit our professional site

Search for legal issues
For help near (city, ZIP code or county)
Please enter a legal issue and/or a location

Why U.S. Businesses Are Wary of China's 'Anti-Terrorism' Law

Article Placeholder Image
By Jonathan R. Tung, Esq. on December 29, 2015 3:00 PM

The final draft of what has been billed as China's Anti-Terrorism law will soon become effective starting Jan. 1 of 2016, and it portends some troubling implications for foreign technology companies operating in China.

Specific and pointed language contained within several articles of the law has led some to speculate that motives behind the law have less to do with countering "terrorism" as defined by Western norms, and more to do with countering the West itself.

China's First Anti-Terrorism Law

The National Peoples' Congress, China's ruling legislative body, stands poised to implement the full force of China's first drafted anti-terrorism law, entitled very appropriately, "People's Republic of China Anti-Terrorism Act." The overall tone of the law is one of rooting out communications that would threaten the safety of the nation and its people.

"Cooperate" ... Promptly

But Article 18 of the Act calls for prompt cooperation from foreign operated technology companies that sell electronic equipment to Chinese banks and financial institutions in handing over the means of access to encrypted data and even source code, according to ArsTechnica. And given China's history of less than stringent intellectual property enforcement, concern is somewhat justified.

More Bark Than Bite

There are those who feel that the Act is essentially another one of China's posturing moves. Owen D. Nee of Greenberg Traurig says that the law "doesn't mean much" and that vagueness in how the law should be implemented was an intended consequence of Chinese legislators. This could perhaps be a strategic move allowing the Communist Party to argue that reasonable interpretation would allow for whatever future implementation seems appropriate.

Getting Out

The law has the potential of being particularly onerous for American and European companies in China who are particularly concerned that the new law may be nothing more than a cover for China's nascent technology industry but ostensibly marketed as something more patriotic. Even President Obama alluded to this point earlier in 2015 when an initial draft of the law was still being discussed. Since China has a stake in each of the Chinese companies that run there, it is reasonable to predict that American businesses will be motivated to move out of the country.

But even if that happens, China will have "won." As foreign technologies move out, Chinese-based technology companies will have decreased competition, thus allowing the country's technology sector to mature.

More and more, it's looking like the Middle Kingdom's anti-terrorism law has less to do with terrorism and more to do with business as usual.

Related Resources:

Find a Lawyer

More Options