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National security law makes China more insecure

When he assumed power as general secretary of the Chinese Communist Party in late 2012, President Xi Jinping faced myriad threats to the party's legitimacy. Xi immediately instituted a vigorous anti-corruption campaign and a savvy media strategy to personalize the top leadership. These two moves have gone a long way toward rehabilitating the image of the party in the eyes of the people.

     But Xi's job is far from over. While he may have made progress in solving the party's image problem, Xi and other leaders still face a host of problems that could endanger social stability, catalyze anti-party sentiment and undermine the government's legitimacy.  Xi and company are aware of these challenges, and there is a persistent sense of anxiety emanating from the leadership compound in Zhongnanhai, central Beijing.

     China's legislature passed a new national security law on July 1, marking the leadership's latest attempt to confront these problems. The law deals with a wide range of perceived threats to the current political order, providing valuable insights into the party's anxieties. Tellingly, it is internal threats that are most worrying -- the law focuses on domestic matters including environmental protection, ethnic unity, negative cultural influences and domestic terrorism.

     The law provides indications of how the government will deal with these issues, but the approaches laid out look more likely to exacerbate existing problems than to mitigate them. Ensuring economic growth has been a key pillar of the party's legitimacy since the death of Mao Zedong in 1976. The law acknowledges this by indicating that "economic security" is a foundation of national security.

     But maintaining economic growth has never been more difficult. After three decades of double-digit annual growth in gross domestic product, the rate of growth has now fallen to about 7%. It is certain to fall further; an inevitable outcome of China's rise to middle-income status and the end of a long period of high-speed catch-up growth.

     To ensure sustainable economic growth in the future, Beijing must carry out a full-scale restructuring of its economy that moves it away from investment-led growth toward an economy driven by consumption. As it does this, it must also increase productivity and efficiency in the economy, which will require a further move away from state intervention, and broader scope for markets to determine outcomes.

     Unfortunately, the security law represents a big step backwards in this respect, evincing a statist approach to economic management that runs completely contrary to the needs of the economy. The law says that the "state maintains the basic economic system," and makes a broad range of economic activities potentially subject to national security provisions.

     It also states that foreign investment will be subject to national security review, although the government has so far refused to offer guidance on how such reviews will be conducted. This has created considerable anxiety among the foreign business community that the law will be used to restrict investment in key sectors. Another section promotes "indigenous innovation," a misguided policy that attempts to engender scientific breakthroughs via top-down government planning, instead of letting market forces dictate technological development.

     In sum, the law looks to be a move away from the party's promise to "let the market play the decisive role" in the economy. As such, it is likely to accelerate China's slowdown rather than put a floor underneath it.

Uptick in terrorism

The new law is also likely to worsen China's domestic terrorism problem. Over the past three years, there has been a marked uptick in terrorist attacks, with hundreds killed and many more injured. Many of these attacks have been carried out by Uighurs from China's far-western Xinjiang province. The most recent example was in mid-June when at least 18 people were killed in an attack on a police checkpoint outside Kashgar.

     Attacks by Uighurs seem to be motivated in large part by ethnic tensions. In short, many Uighurs feel like second-class citizens in China. The reasons for this are many and complex, but they are due at least in part to repressive government policies that serve to limit expressions of Uighur culture. Examples include policies to restrict the teaching of the Uighur language in schools and recent measures that outlaw fasting in Ramadan, a Muslim holy month -- many Uighurs are Muslims.

     The security law will inevitably exacerbate these tensions. It includes provisions to punish activities that divide ethnicities or exploit religion to endanger national security. Such broad provisions have a high likelihood of being abused to prosecute anyone who does not adhere fully to Beijing's line, including some Uighurs who are merely attempting to promote their culture or practice their religion. Such a move would intensify the ethnic and cultural tensions underlying China's terrorism problem.

     The provisions against "negative culture" and the dissemination of "harmful information" are likely to inflame the anti-party sentiments that they seek to contain. Likewise, the law's assertion that it will protect national interests in outer space, the deep oceans and the polar regions will likely increase tensions with foreign powers, rather than reduce them.

     The new law is a disappointing development from an administration that, at times, has espoused insightful and ambitious solutions to China's problems. The anti-corruption campaign was a much-needed attempt to cleanse a party whose venality had spun out of control. Liberalizing economic reforms spearheaded by Premier Li Keqiang and other economic technocrats have offered a clear path towards structural reforms that would put the economy on a firm footing. But the security law suggests that liberal-minded technocratic policymakers have been overtaken by much more conservative elements in Beijing.

     On the upside, however, the vagueness of the law leaves much room for interpretation, and subsequent laws and regulations could serve to ameliorate its conservative tendencies. Perhaps more than any other, China's political system is constantly in a process of change, so the security law should not be taken as the final word on any of the governance issues it addresses.

     But in a system that is constantly evolving, it is important to identify guideposts that indicate the direction of change. While not the final word, the security law shows us that China is heading in a more conservative, closed and statist direction. This is not good for China's security, or that of any other country.

Trey McArver is the founder of the consultancy Trivium Advisors and author of the China Politics Weekly newsletter.

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