Japanese companies are becoming increasingly wary about sending staff to their representative offices in China, as Japanese nationals continue to be taken into custody under Beijing's vague espionage laws.

In late August, national broadcaster NHK quoted Japanese diplomats as confirming that a Japanese man in his 50s was indicted under the espionage law. The man's identity and employer were not provided, and the Japanese government has not been informed of the charges the man faces.

In March 2023, the Japan Times newspaper reported that a man working for Japanese Pharmaceutical company Astellas Pharma was arrested in China for violating espionage laws.

And these are only two of the most recent cases involving Japanese nationals getting caught up in China's national security apparatus.

China becoming 'more exclusionary?'

New legislation expands on China's Counter-Espionage Law, which was introduced in 2014. The expansion was rubber stamped by China's parliament in June 2023, and took effect the following month.

The updated law also expands the definition of espionage by including cyber attacks against state organs or critical information infrastructure, state news agency Xinhua reported.

The new regulations ban the transfer of any information that's deemed related to national security. However, there is no definition of what falls under China's national security or interests, which makes it hard for people to determine if they've run afoul of regulation. 

The Tokyo-based Sankei newspaper conducted a survey in July on Japanese firms with operations in China, with over 53% of the 86 companies that replied expressing concern about the impact of the law on their business and staff in China.

"China has in recent years become more exclusionary towards outside influences and it is becoming more and more difficult to even get a visa," said Morinosuke Kawaguchi, a technology analyst and consultant who was previously a lecturer at the Tokyo Institute of Technology. 

"The trend is for the Chinese government to cocoon its people and to make it harder for them to have any sort of contact with foreigners," he told DW.

"I can understand why Japanese companies and their employees are afraid to go there," he said. "They can claim anything they like against you and something meaningless can be evidence against you."

Asked whether he would be willing to go to China for a work assignment at the moment, Kawaguchi is unequivocal, "No, definitely not."

Since 2014, at least 17 Japanese nationals who have been arrested under China's espionage laws. Nine were given prison terms after trials that took place behind closed doors. Several others are still awaiting trial. 

Business and academic ties under pressure

Japanese companies were attracted to China in the past by the large workforce and relatively low wages, the easy availability of land for manufacturing plants and local companies that were keen customers or wanted to provide components or services.

Stephen Nagy, a professor of international relations at Tokyo's International Christian University, and formerly a frequent visitor to China, told DW that "the relationship between China and Japan will get more difficult as we go forward, especially in trade."

Nagy added that there are 37,000 Japanese small and medium-size enterprises with a presence in China. He added that academia has similarly been impacted by the new regulations and he sees no likelihood of him returning to the country any time soon. 

"Myself and many colleagues who have worked in China in a range of academic fields are just very reluctant to go back again," he said. "The worry is that anything you do, even the most trivial and inconsequential act, could be regarded as some form of espionage."

The danger of fewer academic exchanges with the outside world is that misunderstandings increase, leading to less trust and challenges that are even harder to overcome, Nagy suggested.

Geopolitics affects business 

Geopolitical differences of opinion between Tokyo and Beijing have been a constant shadow over business links. 

In 2010, a Chinese fishing boat was boarded and impounded by the Japan Coast Guard after it was found operating illegally within Japan's territorial waters around the Senkaku Islands in the East China Sea. Beijing also claims the uninhabited islands, which it refers to as the Diaoyutai archipelago.

The captain of the fishing boat, Zhan Qixiong, was transported to Okinawa to face charges, triggering angry criticism from Beijing and in the Chinese media that led to Japanese businesses, including supermarkets, restaurants and car dealerships, being attacked.

There were again isolated reports of Japanese businesses being targeted after Japan started to release treated water from the Fukushima plant last month, although on a far smaller scale.

Nevertheless, with tensions over the water release and the Senkaku islands not resolved and Tokyo deeply concerned that Beijing will attempt an invasion of Taiwan, it is unlikely that the two Asian neighbors will be moving closer in the near future.

And with Japan largely unable to protect its citizens once they are in China, Nagy said fewer Japanese will want to be transferred there and more companies will be looking to shift their overseas operations out of the country and to re-establish themselves in a safer location, such as Vietnam, the Philippines or India. 

"Companies cannot protect their staff when they are [in China] and they can do nothing if they are arbitrarily arrested," he said. "Employees can no longer take their families on China postings, so they are turning down these positions."

"China may be strengthening its internal ideological situation through this law, but it is hurting trade and its economy and slowly becoming a country that only has its own understanding of the outside world, one that is controlled completely by the Chinese Communist Party," Nagy said. "And that could be a disaster for Chinese businesses and society."

Edited by: Wesley Rahn