Chinese “state secrets” demystified

Cross-border litigation and investigations have proved to be a significant hurdle in China. Due to its broad definition and stringent protection of state secrets, China is often unwilling to cooperate with requests for the transfer of certain documents and information. This was particularly highlighted in the settled dispute in 2014 between the big four accounting firms and the United States Securities and Exchange Commission.

Investors and practitioners within the international sphere, whether at multinational corporations (MNCs) or law firms, need to be aware of the serious consequences, which include criminal liabilities, of breaching China's state secret laws. Understanding how the law defines state secrets and, more importantly, the type of information case law prescribes to be a state secret, is crucial. The rules are set in the PRC Law on the Protection of State Secrets (State Secrets Law), the Implementing Regulations for the PRC Law on the Protection of State Secrets (Implementing Rules) enacted in 2014, as well as certain provisions in the PRC Criminal Law.

The broad application of state secrets protection in China is manifested in three ways: (i) protecting state secrets is an obligation imposed on all entities and individuals that have become aware of any state secrets; (ii) the scope of state secrets is broadly prescribed by the law; and (iii) various administrative bodies have almost unfettered discretion as to determine what constitutes a state secret in practice.

State secrets in law

During cross-border discovery or data transfers, it is critical to determine whether the information, based on its content, can legally be exported outside of China.