China and Sovereignty of Information

In the wake of Edward Snowden's leak of NSA secrets,  surveillance, privacy and the nature of information have dominated headlines. Thesigers has been toying with the notion of "sovereign data" for a while, and the atmosphere is clearly ripe for a more focused exploration of its meaning. We asked leading scholars to engage critically with the concept. In this third essay in a series, Kit Dawnay discusses sovereign control of information in China and the changes wrought by social and technological change.

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by Kit Dawnay

Revelations about the scale of the US National Security Agency’s espionage activities have intensified discussions about how best to limit sovereign control over information.  The debate is lively in the US and other democracies, but China’s experience also illustrates how economic and technological changes have affected government efforts to control information.  

 

China’s journey

Sovereign control over information, which might be defined as a state having freedom from external control with regard to the rights to the use and production of information, is a paramount concern for the government in China. 

Indeed, the Chinese Communist Party (CCP) has long adhered to the highest levels of opacity and intrusion, making the People’s Republic of China (PRC) an outlier in terms of its attitude towards sovereign control over information - at least when set against the US, European states and even post-Soviet Russia. 

The CCP’s attitude to information draws from two key traditions, one longstanding in Chinese history and one a more recent consequence of the CCP’s historical trajectory.  The first feature is that China’s governments have almost always operated from behind closed doors.  A crucial component of this closeted rule has been the limited circulation of information, amongelites only.  China has no tradition of open, rowdy policy discussion.  Its early twentieth century dalliances with representative bodies proved short lived, and unsuccessful.  Accordingly, the CCP’s inclination to “nationalise” information and take an extreme view of sovereign control over it feels natural in the context of Chinese history. 

The second, more recent, experience stems from the CCP’s own historical context.  The party has long felt under siege.  Indeed, police agents forced the evacuation of its very first meeting in 1921, with party founders decamping to a boat on a lake outside Shanghai.  A united front with the Guomindang in the 1920s came to an end with a massacre in 1927, after which the party became the target of bloody “bandit suppression” campaigns in the 1920s and 1930s. 

This campaign of repression meant that the CCP had to operate in the greatest secrecy.  The party survived by instituting a cell system that limited cadres’ knowledge of other members or of policy beyond their sphere of work; one arrest could only lead to four more members, rarely more.  The war against Japan, the civil war between 1945 and 1949, and the 1950 to 1953 conflict in Korea did nothing to soften this siege mentality. 

The CCP thus took an extreme view of state sovereignty over information when building the PRC.  In the 1950s, the government established a monopoly of information and required ideological orthodoxy of its citizens, jailing, sending to labour camps or executing those who did not comply.  A brief relaxation in the 1956 Hundred Flowers campaign resulted in a torrent of criticism, prompting Mao to re-establish control and to maintain this stance until his death in 1976, through the famine and turmoil of the Great Leap Forward and the Cultural Revolution.  Mao’s China thus took an absolutist approach to sovereign control over information, as to everything else, in line with the chairman’s paranoia; the state had a right to know everything, and to keep everything secret. 

Deng Xiaoping’s opening of China in the 1980s started a process of economic liberalisation, also resulting in a shift away from Mao’s extreme view of sovereign control of information.  Of course, the process was slow and staggered, with tightening in the aftermath of the 1989 massacre but loosening following Deng’s 1992 southern tour.  Any relaxation has also always been qualified, with the CCP seeking to maintain dominance.  Yet Deng’s changes have proven profound and lasting. 

One reason for this departure from an extreme adherence to sovereign control over information was that social and technological change have made it increasingly difficult to control information.  The spread of telephones, televisions, mobile phones and the internet, as well as the relaxation of travel constraints, transformed Chinese society; perhaps the most recent manifestation of these changes has been the emergence of weibo, or microblogs, hosted by companies such as Sina Weibo and Tencent on the internet from about 2007. 

Demand for information has also grown in line with the country’s wealth and prestige, from people keen to understand their society, from news organisations covering events and from investors seeking a better understanding of business partners.  Indeed, this need for information has spawned an industry of corporate investigators; companies ranging from stock exchange listed firms, such as Kroll, to one-man bands, now gather details on Chinese businesses, examining shareholders, solvency, and the reliability of political sponsors. 

 

Regulating transparency

This shift away from an extreme view of sovereign control over information was discernible in rules on corporate information.  The 1993 Companies Law, for instance, contained no provisions relating to public or shareholder access to information on company registration, meaning that gathering detail was very difficult without specialist assistance.

The 2005 Companies Law, by contrast, established a right of public access.  Under the 2005 law, the public has a right to collect information including: the company name; its address; its legal representative; registered capital; its business classification; its scope of business; its termination date; and the identity of shareholders.  The 2005 Law thus marked a significant shift away from the traditional stance of absolute sovereign control over information, not least as many of China’s most important companies are state owned. 

Of course, collecting information is still difficult.  The State Administration of Industry and Commerce is the main repository of corporate information; its local Administrations of Industry and Commerce (AICs) provide registration and licensing services.  A Chinese lawyer must go in person to the relevant AIC, register with their identification card, and pay a small fee, before seeing the relevant details.  The standard of information varies immensely, although unfamiliarity with the registration process has actually often meant that Chinese companies disclosed more information than might private companies in the US or UK.

For its flaws, however, this corporate information regime demonstrates the extent to which the Chinese state has departed from the Maoist view of sovereign control of information.   

 

Rowing against the current

In recent years, signs have emerged that the Chinese government desires a return to a stricter view of sovereign control of information.  An illustration of this change in perspective emerged in 2009, with the arrest of Stern Hu. 

Stern Hu was born in China, but secured Australian citizenship.  He worked for the mining company Rio Tinto, gathering information on iron ore prices, sometimes at conferences, sometimes through the payment of fees to consultants. 

In March 2009, the authorities arrested Hu for dealing in “state secrets”.  Hu’s activities had taken on political importance, as they weakened Chinese government’s efforts to negotiate with iron ore suppliers and so seemingly angered then-premier Wen Jiabao.  Hu’s arrest caused a furore in business circles, though, partly in response to which the authorities reduced the charges to bribery and stealing “industrial secrets”.  Hu nonetheless received a five year prison sentence in March 2010. 

A comparable case arose in July 2010, when the authorities sentenced a geologist, Xue Feng, to eight years in prison for stealing state secrets.  Xue, a Chinese citizen who held US citizenship, received the sentence for handing over publicly available information about the location of 30,000 oil wells in China to a US company, IHS Energy.  Three other associates received sentences.  Again, the episode contained a political element, with then security chief Zhou Yongkang pushing for prosecution. 

Encoding this shift, China’s National People’s Congress amended the State Secrets Law in April 2010 to cover commercial information relating to major state-owned enterprises.  The changes granted the investigative agencies powers to deem a piece of information an “industrial secret” on a retrospective basis, thereby justifying its designation as a “state secret”. 

These developments sent a clear signal to foreign businesses that their researchers should be cautious in handling commercial information, particularly if operating in politically sensitive sectors such as commodities.  They also hinted at a reversion to a wider view of sovereign control of information than that represented by the 2005 Companies Law.

 

Corporate information

Two developments seem to have encouraged the CCP in this reappraisal.  The first was a flood of “back door listings” on US and other western stock markets, whereby Chinese companies bought listed corporate vehicles and so skirted stringent disclosure processes.  The lack of information available to investors led to some scandals, though.  Hedge funds responded by researching the relevant companies and, where necessary, shorting their stock.  One celebrated case came in June 2011 when Muddy Waters, a short seller, revealed that Sino-Forest, a Chinese forestry company listed on the Toronto Stock Exchange, owned fewer forestry reserves than claimed. 

The second development was that news organisations examined the wealth of China’s senior leaders.  An investigation in June 2012 by Bloomberg into the holdings of the family of soon-to-be CCP General Secretary Xi Jinping showed that his relatives, if not the general secretary himself, enjoyed huge wealth.  In October 2012, the New York Times also revealed that premier Wen Jiabao’s family (including his wife and aging mother) had amassed millions.  These revelations deeply angered senior leaders, further fuelling a reversion to a wider view of state sovereignty over information.

From April 2012, then, reports emerged that access to corporate documents was becoming more difficult.lLawyers stated that the AICs in Shandong Province, and the Tianjin, Shanghai and Beijing municipalities were proving especially reticent at disclosing information.  The documents in question included audit and financial reports, some lawyers claimed. 

The authorities simultaneously limited access to hukou (or household registration) documents, which are almost the only means to demonstrate that a Chinese citizen is who they claim to be.  In September 2012 a subsidiary of the investigative firm Dun & Bradstreet was prosecuted in Shanghai for “illegally obtaining private information from Chinese citizens”, which in practice meant gathering hukou details.  The courts gave four employees two years in jail. 

In August 2013, officials investigating claims of fraud conducted by GlaxoSmithKline, a major pharmaceutical company, then arrested a British due diligence practitioner, Peter Humphrey, his American wife, Yu Yingzeng, and half a dozen affiliate staff of Humphrey’s company ChinaWhys for illegally gathering personal information.

 

Internet crackdown

This effort to expand sovereign control over information has also played out over the internet.  After all, weibo present the government with a dilemma.  Posting online has offered people a means to air grievances and provided the CCP a mechanism to monitor or influence public opinion.  However, untrammelled freedom for weibo users also threatens to undermine the party’s legitimacy. 

The risk inherent in their use became especially clear in the wake of the Wenzhou railway disaster on 23 July 2011, when a train collision killed more than 40 people.  That accident provoked searing criticism on weibo, with discussions becoming especially inflamed when users established that officials had botched the rescue, tried to bury wreckage in order to hide evidence, and that it was only thanks to the intervention of weibo users that rescuers had found a two-year-old girl. 

Weibo also evolved into an important means of tackling corruption.  In late 2011, a watch aficionado took to posting details about the timepieces worn by senior CCP officials in photographs.  Many of the watches had price tags far in excess of the official’s salary, leading to accusations of corruption. Needless to say, the authorities closed down the blog. 

The CCP has responded to this threat by seeking to re-establish sovereign control over information.  First, in March 2011 the authorities required weibo users to register in their own names, and obliged hosts such as Sina Weibo and Tencent to delete inappropriate posts.  Second, in mid-2013 the government launched a website aimed at “clarifying rumours”.  Third, the authorities have taken action against prominent users or “Big Vs” (verified users); for example, in August 2013, police arrested Charles Xue Biqun (known as Xue Manzi), a prominent commentator on business and social issues, for consorting with prostitutes.  

Then, in mid-September 2013, the judicial authorities published new rules for internet use, establishing defamation as a criminal offence, alongside offences such as “spreading online rumours”, “triggering upsets of public order”, “causing vile social influence” and “harming the country’s image”.  Guidance from the judicial authorities stated: “The use of information networks to commit provocations and other grave such crimes has created grave destruction of social and public order…Acts of jeering and stirring up trouble easily lead to mass incidents and create grave upsets of public order.”  

These steps amounted to significant limitations on the use of weibo, and seem to derive from Xi Jinping’s stated determination to seize control of the new media.  The effort against weibo also recalls similar public campaigns of the Mao Zedong era, adding weight to the sense that the CCP wants to reverse the trend towards the increased liberalism of the last two decades. 

 

Conclusion

The CCP’s stance towards sovereignty of information has thus shifted over time.  The party worked to an extreme standard of sovereign control over information after 1949, maintaining stringent limitations on access to all information and running intrusive surveillance programmes throughout the Mao Zedong years.  Deng Xiaoping relaxed these measures in line with the broader economic reforms implemented in the 1980s, even if any liberalisation has always been qualified.

The adoption of further economic reforms in the 1990s played a crucial role in movement towards a narrower view of sovereign control over information.  The weight of China’s economy expanded, leading to an increase in foreign businesses’ need for information, and the 2005 Companies Law demonstrated willingness to work to a new level of transparency.  The expansion of weibo use from 2007 had similar consequences in the social arena. 

However, these developments discomforted the CCP.  Since about 2009, the Chinese government has shown signs of reverting to its more expansive view of sovereign control over information. It has done this in four ways: by broadening the definition of “state secrets” to include commercial information, by limiting access to corporate documents, by arresting due diligence providers, and by acting against prominent commentators on weibo.  This shift is by no means back to the extremes of the Mao Zedong years, but nonetheless amounts to a departure from the trend towards liberalisation of recent decades. 

The question now is whether the government has the political and technological capacity to maintain its course.  The capacity of the Chinese police state is undoubtedly significant, and limitations on information will leave the government facing less pressure to enact social and or economic reforms.  The Chinese authorities are not omnipotent, and cannot reverse social changes overnight. 

More, without reforms, the administrative edifice may weaken as unaddressed tensions intensify, raising the risk that changes in China’s society will outpace the police state’s ingenuity.  Accordingly, any reversion to Maoist tradition could presage a real risk of political instability in the years ahead. 

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About the author: Kit Dawnay is an independent political and foreign affairs analyst based in Hong Kong. 

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