Chinese state secrecy laws classify a great deal of ordinary, everyday business information and even public information as national security secrets. Since the law is so easily broken by accident, police have raided and penalized numerous international consulting firms for illegally procuring state secrets. China’s crackdown on foreign espionage crackdown which started in 2023, means that state secrets legal compliance is now a major concern for international business.
To add to the confusion, the China State Secrets Act of 2024 recently expanded what can be considered classified information and further mandated a more robust enforcement policing and restrictions on digital transfer. Despite how alarming the law has been for the international business community; the rules are very clear and can be easily followed by well-informed professionals. This explainer by CBL will provide an overview of what these rules require, and how businesses can avoid accidental violations.
Contents
Accidentally Accessing State Secrets
State Secrets Act Overview
The revised Act incorporates the 2014 Comprehensive National Security Vision, which covers national security encompassing living standards, science, social welfare, and defense industries. It uses an expansive definition of state secret designed to comprehensively protect Chinese national security. Businesses operating in China should plan to comply with the state secret classification system, industry specific state secret regulations, and evolving legal rules that are progressively implementing the principles espoused by the Vision.
Several key amendments in the most recent version of the Act are below:
“Classified information” is clearly defined, and government is empowered to expand or reduce what is covered. (§ 15)
Designating classification officers and designation of secrecy protected sites (§ 19 & § 26)
Classification reviews must be done annually, and individuals who fail to perform the review as required can be held personally liable (§ 24 & § 58)
Internet secrecy administrative rules require state secrets be protected whenever someone uses the Chinese Internet to produce, copy, post, or distribute information. Internet companies must cooperate with government agencies when investigating and prosecuting alleged disclosures of state secrets. If they discover Internet content that may disclose a state secret, the Internet company must quickly delete the data and physically sanitize any storage media. (§ 33 & 34)
Identifying State Secrets. The Revised China State Secrets Act defines what constitutes a state secret with specific examples for certain industries. A state secret refers to anything that may impact the national interest and security, the access to which is restricted to designated individuals for a definite period of time for duties involving governance, defense, diplomacy, economy, society, technology, national security activities, and criminal investigations. In addition to this, any information that could jeopardize the national interest in governance, economics, defense, or diplomacy must be deemed a state secret.
What is Deemed Classified?
A “work secret” is anything held by a Chinese government agency or organization that is not classified as a state secret nonetheless must be kept confidential because its disclosure would have negative impacts. Under this provision, what is designated as a work secret can be changed by future agency rules. This raises a concern among international businesses that state secret classifications will expand even more.
However, on the face of the text, a work secret is fundamentally different from a state secret, because the impact of their disclosure is significantly lower, thus they are less rigorously protected. China’s legislative intent also recognizes that state secret classifications should not be expanded because this would compromise open government initiatives.
The Anti-Espionage Act is intended to secure Chinese national security secrecy as part of a multifaceted national security regime. Under § 4 thereof, espionage activities are defined as whenever a foreign espionage organization receives state secrets from a domestic party. The legislature has clarified that any stealing any “national security related information” counts as espionage, the information does not have to be a state secret.
Thus, national security agencies enforcing the China Anti-Espionage Act could quietly expand the definition of “state secret” in order to achieve certain national security goals. That scope creep risk can be mitigated by having your China based subsidiary do national security compliance screening on documents before being provided to their parent company or affiliates, with counsel from an outside law firm as necessary.
The classifying agency under the Revised State Secrets Act is the State Secrets Bureau, which is now empowered to issue regulations, but there is still ambiguity as to its authority over parts of the economy; previously the Bureau had to issue rules jointly with the agency appropriate to an affected industry. Designating this government agency as the appropriate agency to issue new classification regulations represents a professionalization of Chinese internal security services, because previously laws ambiguously stated “the government” would issue new rules as necessary.
The current rules for what secrecy designations are throughout the government are found in the Secrecy Designation, Revision, and Application Procedures (State Secrets Bureau Order No. 1 2017).
Classification Levels
The China State Secrets Act designates the classification levels as Confidential, Secret, and Top Secret with grading based on the impact of disclosing such secrets and establishes a time period for each classification level.
- Top Secret: Critical information the disclosure of which would imperil the national interest and security (classified for 30 years)
- Secret: Important information the disclosure of which would damage the national interest and security (classified for 30 years)
- Confidential: General state secrets the disclosure of which would impair the national interest and security (classified for 10 years)
There are three further important administrative procedures governing state secrets: the State Secrets Classification Administrative Rules (2025); and the State Secret Storage Media Management Rules (2020).
These laws require that state secrets be labeled and recorded with text, data, or symbols on storage media such as paper or magnetic tape. The label must be placed prominently to show the classification level and protected time period with a star symbol and text as:
Confidential ★ for ___ Years
Secret ★ for ____ Years
Top Secret ★ for ____ Years
In reality, the various governmental agencies use haphazard non-standard classification labeling practices, often just copy the main document text while ignoring the labeling, resulting in the recipient being unable to use the classification label and ultimately being penalized for unlawful disclosure.
Accidentally Accessing State Secrets
A foreign business should set up staff training and incident response programs with a special focus on foreign employees in order to proactively comply with Chinese law. State secrets can be legally used by foreign businesses, and this is often done, for example a health company may learn from the government a certain county has a certain high AIDS infection rate.
Be cautious when utilizing state secret data, especially when working in public private partnerships with government agencies, state owned enterprises, or in sensitive industries. Staff should be given preventative training in how to recognize state secrets symbols, awareness of what kinds of secrets they may encounter in their industry, and how to thoroughly inspect storage media for state secret classification labels. Employees must avoid copying or handling any government documents that have a red colored letterhead and immediately report it to your company’s legal counsel.
Avoid using any document that may be classified as a state secret but does not have a classification label on it, until your staff have contacted the organization providing the document to first ask whether the cover page or container for the document had a classification label on it.
Human Resources Risks
The Act § 46 imposes a post-employment restriction period during which the individual with prior state secret access is prohibited from working for certain classes of employers or exiting China. After the post-employment restriction period, the individual must continue to perform their secrecy obligations.
Use background checks to determine whether a prospective employee would be subject to these national security obligations. In addition to checking for non-compete obligations as required by the Employment Contracts Act, the background check should investigate whether they are subject to a post-employment restriction period for state secrets, and require them to provide a commitment that they will continue to maintain the confidentiality of any state secrets known to them after the period expires.
Expats working in China have been implicated in unlawful disclosure of state secrets recent years due to their ignorance of local legal requirements. These workers need to be provided with effective compliance training. A special concern is to prevent them from inadvertently photographing military or defense structures, government agency offices, or any sort of planning diagrams, and the take special care to avoid transmitting such information outside of China.
Prepare in advance a state security response plan so that company legal compliance officers are notified immediately if staff are the subject of a state security investigation. The incident response plan will instruct staff to proactively cooperate with the state security agency’s investigation and contact outside legal counsel to assist.