Finance

The year is 2034. America’s “magnificent seven” firms comprise almost the entirety of the country’s stockmarket. For Jensen Huang, the boss of Nvidia, another knockout quarterly profit means another dizzy proclamation of a “tipping point” in artificial intelligence. Nobody is listening. The long march of passive investing has put the last stockpickers and stock-watchers out of a job. Index mutual and exchange-traded funds (ETFs)—which buy a bunch of stocks rather than guessing which ones will perform best—dominate markets completely. Capitalism’s big questions are hashed-out in private between a few tech bosses and asset managers.In reality, the dystopia will probably be avoided: markets would cease to function after the last opinionated investor turned out the lights. However, that does not stop academics, fund managers and regulators from worrying about unthinking money, especially in times of market mania. After the dotcom bubble burst in 2000 Jean-Claude Trichet, a French central banker, included passive investment in his list of reasons why asset prices might detach from their economic fundamentals. Index funds, he argued, were capable of “creating rather than measuring performance”. America’s red-hot markets have brought similar arguments back to the fore. Some analysts are pointing fingers at passive investing for inflating the value of stocks. Others are predicting its decline.image: The EconomistSuch critics may have a point, even if some are prone to exaggeration. It seems likely there is a connection between the concentration of value in America’s stockmarket and its increasingly passive ownership. The five biggest companies in the S&P 500 now make up a quarter of the index. On this measure, markets have not been as concentrated since the “nifty fifty” bubble of the early 1970s. Last year the size of passive funds overtook active ones for the first time (see chart). The largest single ETF tracking the S&P 500 index has amassed assets of over $500bn. Even these enormous figures belie the true number of passive dollars, not least owing to “closet indexing”, where ostensibly active managers align their investments with an index.Index funds trace their origins to the idea, which emerged during the 1960s, that markets are efficient. Since information is instantaneously “priced in”, it is hard for stockpickers to compensate for higher fees by consistently beating the market. Many academics have attempted to untangle the effects of more passive buyers on prices. One recent paper by Hao Jiang, Dimitri Vayanos and Lu Zheng, a trio of finance professors, estimates that due to passive investing the returns on America’s largest stocks were 30 percentage points higher than the market between 1996 and 2020.The clearest casualty of passive funds has been active managers. According to research from GMO, a fund-management firm, an active manager investing equally across 20 stocks in the S&P 500 index, and making the right call most of the time, would have had only a 7% chance of beating the index last year. Little wonder that investors are directing their cash elsewhere. During the past decade the number of active funds focused on large American companies has declined by 40%. According to Bank of America, since 1990 the average number of analysts covering firms in the S&P 500 index has dropped by 15%. Their decline means fewer value-focused soldiers guarding market fundamentals.Some now think that this trend might have run its course. Students embarking on a career in value investing will consult “Security Analysis”, a stockpickers bible written by Benjamin Graham and David Dodd, two finance academics, and first published in 1934. In a recently updated preface by Seth Klarman, a hedge-fund manager, they will find hopeful claims that the rising share of passive money could increase the rewards yielded by pouring over firms’ balance-sheets.Fees charged by active managers have declined significantly; perhaps election-year volatility will even help some outperform markets. A few might gather the courage to bet on market falls. If they are right, their winnings will be all the bigger for their docile competition. But for the time being, at least, passive investors have the upper hand. And unless the concentration of America’s stockmarket decreases, it seems unlikely that the fortunes of active managers will truly reverse. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

It is, by now, a familiar story. A metal previously only traded in a sleepy corner of commodity markets becomes vital for the energy transition. Constrained supply and geopolitical jockeying meet forecasts for ever-rising demand. Prices surge as investors foresee a crunch. The only wrinkle in the story is that this time the metal is not used in electric vehicles or solar panels; it is used in the decades-old technology of nuclear reactors. Uranium prices are blowing up.Hoarding uranium oxide—which, once processed and enriched, is the main fuel for nuclear bombs and reactors—might seem like a strategy more suitable for supervillains than investors. But speculators now have a number of ways to gain exposure. Stockmarket darlings include Yellow Cake, a firm that buys and stores the stuff, whose share price is up by 160% over the past five years, and Sprott Physical Uranium Trust, a fund that does the same and has enjoyed returns of 119% since its launch in 2021. Hedge funds have got in on the action, too, reportedly stockpiling the metal and buying options on uranium from banks.According to UXC, a consultancy, prices on the spot market have more than tripled from $30 a pound in January 2021 to a recent peak of over $100, the highest in 16 years. An initial rise was spurred by speculation that Western governments would impose sanctions on Rosatam, a Russian firm. A coup in Niger in July prompted another rise. Then in September Kazatomprom, the world’s biggest supplier, warned that a shortage of sulphuric acid would reduce production.At the same time, Western countries are trying to build their own supply chains, since Rosatom currently has more than half the world’s enrichment capacity. In December America, Britain, France and Japan together committed $4.2bn to build facilities to separate uranium-235 isotopes, the only naturally occurring material that can undergo fission, from the more common uranium-238.The world needs reliable low-carbon electricity and nuclear power is one of the few options available. Governments have announced plans to expand capacity: Sweden has pledged another two reactors by 2035 and the equivalent of ten more by 2045; last year Japan restarted three that had been mothballed; America recently connected its first new reactor in eight years. All of this is small-bore compared with China, which plans to build another 150 reactors over the next decade. Little wonder that investors are pouring in.Yet there are reasons for caution, which start with the supply crunch. Although Niger’s coup was dramatic, the country is only the seventh-largest uranium supplier and it is not clear that there will be a permanent reduction in output. Moreover, many governments have stockpiles, often acquired for defence purposes, which can be released for civilian use. Investors can only guess how much policymakers will be willing to let out. And energy firms have stockpiles of their own, which are often sufficient to keep them going for a few years.Then consider demand. Nuclear’s history is one of false starts: it has never delivered the too-cheap-to-meter power once promised. During oil shocks in the 1970s uranium prices rose more than sixfold, reaching a peak of $44 in 1979, equivalent to $198 today. Owing to subsequent falls in oil prices, uranium prices had halved by 1981. Later, in the 2000s, a bubble grew. Prices jumped from $10 in 2003 to $136 in 2007 as investors forecast a nuclear renaissance thanks to “peak oil”, a supply crunch and dwindling Russian stockpiles. Things went wrong during the global financial crisis of 2007-09; Japan’s Fukushima accident in 2011 appeared to be the final nail in the coffin.For a happy ending this time, nuclear power must finally come good. Demand—from energy firms, not just speculators—must rise, which will require someone to pay nuclear’s colossal upfront costs or make the power source cheaper. Both are plausible: net-zero targets might mean governments are willing to spend big; a number of startups are working on small modular reactors, which would lower construction costs if successful. China, which has the most ambitious plans to build capacity, has so far managed to contain costs.But return to the example of other metals. When prices surge, more supply is almost always found and customers discover cheaper alternatives. That is what happened with cobalt, lithium and nickel. High prices are the solution to high prices, goes the saying in commodity markets. How confident can investors really be that uranium is different? ■Read more from Buttonwood, our columnist on financial markets: Should you put all your savings into stocks? (Feb 19th)Investing in commodities has become nightmarishly difficult (Feb 16th)The dividend is back. Are investors right to be pleased? (Feb 8th)Also: How the Buttonwood column got its name More

Since 2017 Chinese car conglomerate Geely’s founder and chairman Eric Li has been building Ecarx, that offers software and chip systems for digital car cockpits and driver-assist.
Ecarx co-founder and CEO Ziyu Shen told CNBC that Nvidia currently has an edge when it comes to AI-based autonomous driving systems, but that Ecarx is aiming for the mass market and is about to announce products that compete directly with Nvidia’s offerings.
Ecarx plans to benefit from selling to local Chinese companies that need to buy from domestic firms due to geopolitical reasons, Shen said.
He expects the overseas market to be a growing business for the company as well and something that offers it an edge over Chinese competitors such as Huawei.

Chinese automaker Geely unveils first model of its new Lynk & Co brand in Berlin. 
Ullstein Bild Dtl. | Ullstein Bild | Getty Images

BEIJING — Companies from Nvidia to Huawei are chasing the market for in-vehicle tech as the electric car industry booms, with Ecarx emerging as a new contender.
Since 2017, Chinese car conglomerate Geely’s founder and chairman, Eric Li, has been building Ecarx that provides software and chip systems for digital car cockpits and driver-assist.

The company on Wednesday reported its fourth-quarter revenue surged 22% from a year earlier to $263 million. Geely’s car brands, such as Lynk and Co, made up 70% of that revenue.
For the same quarter, Nvidia reported automotive revenue fell 4%, year on year, to $281 million, even as CEO Jensen Huang has called the segment the company’s “next billion-dollar business.”
Nvidia counts Geely’s premium electric car brand Zeekr as a customer for its Drive Orin chip, which uses artificial intelligence to power driver-assist capabilities known as “system on a chip.” Li Auto, BYD’s Denza brand and Xiaomi are among Nvidia’s other automotive customers.
Ecarx co-founder and CEO Ziyu Shen told CNBC in an interview this week that Nvidia enjoys an edge when it comes to AI-based autonomous driving systems.
“We can’t compete with them in this area,” he said, but noted there’s still about 70% or 80% of the car market that doesn’t need such advanced tech, and can buy simpler driver-assist tech focused on safety.

“Safety will be a very important entry point for us,” he said in Mandarin, translated by CNBC.

Ecarx sells its own “system on a chip” Antora 1000 that’s used by Lynk and Co.
Shen claimed his company’s current products compete directly with Qualcomm’s Snapdragon chips, and that new offerings set to be announced on March 20 will be at the same level as Nvidia’s Orin X.
So despite conceding Nvidia’s current primacy in AI-based tech, Shen is looking at diverse ways to grab more market share in autos.

Geopolitical advantage?

Ecarx plans to benefit from selling to local Chinese companies that need to buy from domestic firms due to geopolitical reasons, Shen said, adding that the company works with nearly all major automakers except for BYD in China.
He expects the overseas market to be a growing business for the company as well and something that offers it an edge over Chinese competitors such as Huawei.
In the last few months, Huawei has disclosed several agreements to sell its operating system and other car tech to automakers in China but has yet to announce major overseas deals in the sector. The company also sells electric cars through its co-developed brand Aito.
“I think it is very difficult for Huawei to go global because it is a sanctioned company,” Shen said. “I think it will be very hard for Western companies to cooperate with them.“
When asked about the impact of U.S. restrictions on Chinese tech, Shen claimed his company has isolated China operations from its overseas business, and follows local compliance requirements pertaining to AI chip-related business in the U.S. as well as intellectual property protection.
Ecarx’s website lists offices in the U.S. and Europe, as well as China.
Shen aims Ecarx to grow its overseas sales from around 10% of current revenue to at least 25% next year, and to at least 40% in the next four or five years.
“To be honest, if we can’t serve the world’s five largest automakers, it’s very hard for us to become a big company,” he said, “because none of China’s [original equipment manufacturers] are among the world’s top five.”
BYD was by far the largest car company in China last year, followed by Volkswagen’s local joint venture with FAW, according to data from the China Passenger Car Association that included fuel-powered vehicles. Geely ranked third.
In new energy vehicles, which include hybrids and battery-powered cars, BYD ranked first, followed by Tesla, GAC’s Aion brand and then Geely, according to association data. More

Paramount Global missed revenue expectations for the fourth quarter but posted a surprise quarterly profit.
Paramount+ reached 67.5 million subscribers during the period, a net increase of 4.1 million.
Paramount has been exploring sale options for all or parts of its business in recent months

Getty Images

Paramount Global missed revenue expectations for the fourth quarter on Wednesday but posted a surprise quarterly profit and posted strong results from its streaming platform Paramount+.
Here’s how Paramount performed in the fourth quarter compared to Wall Street estimates from LSEG, formerly known as Refinitiv:

Earnings per share: 4 cents vs. an expected loss of 1 cent
Revenue: $7.64 billion vs. $7.85 billion expected

For the last three months of 2023, Paramount reported a profit of $514 million, or 77 cents per share, up from $21 million, or 1 cent per share, the year prior. Adjusted for one-time items, earnings per share were 4 cents for the period.
Paramount — home to brands such as CBS, Showtime, BET, Nickelodeon and its namesake movie studio — reported a 6% year-over-year revenue decline but posted notable strides in its streaming segment.
Paramount+, its flagship streaming service, reached 67.5 million subscribers during the period, a net increase of 4.1 million, and recorded 69% revenue growth year over year. The company expects to achieve profitability for Paramount+ by 2025, it said Wednesday.
Subscription revenue in the fourth quarter grew 43%, partially driven by price increases, and revenue across its entire direct-to-consumer segment grew 34%.
Paramount saw a 27% jump in global viewing hours across Paramount+ and Pluto TV during the fourth quarter.

“Looking ahead, we continue to be focused on maximizing the return on our content investments and scaling streaming, while transforming the cost base of our business,” CEO Bob Bakish said in a press release. “And I couldn’t be more thrilled with the early momentum we’ve had across every platform in 2024, demonstrating the power of our strategy and assets.”
Paramount has been exploring sale options for all or parts of its business in recent months as the media landscape rapidly changes. Paramount has struggled without a solid growth narrative, with shares down more than 50% over the past two years.
Warner Bros. Discovery had been in preliminary talks to acquire Paramount, but those talks have since halted, CNBC’s Alex Sherman reported Tuesday.
Paramount announced about 800 layoffs earlier this month, just a day after the company revealed it had reached record viewership numbers for this year’s Super Bowl.
The company on Wednesday reported its TV media revenue declined 12% year over year. Advertising revenue declined 15% due to overall “softness in the global advertising market and 5-percentage point impact from lower political advertising,” according to the earnings release.
Revenue in Paramount’s filmed entertainment sector sank 31% year over year, driven by lower licensing revenue.
This story is developing. Please check back for updates.Don’t miss these stories from CNBC PRO: More

In economic terms, an asset has value because an owner might derive future benefits from it. Some assets, like cryptocurrencies, require a collective belief in those benefits. Others, like wine, will undeniably provide future pleasure, such as the ability to savour a 1974 Château Margaux. Still others, like American treasuries, represent a claim on the government of the strongest economy in the world, backed by a formidable legal system.To derive such benefits, however, an owner must be able to access their assets. And that is where the Central Bank of Russia struggles. Much like every other central bank, the CBR stores reserve assets abroad. After Vladimir Putin’s invasion of Ukraine in 2022, the G7 froze these assets and prohibited financial firms from moving them. Of the €260bn ($282bn) of Russia’s assets immobilised in Japan and the West, some €191bn are held at Euroclear, a clearing-house in Belgium. When coupon payments on Russia’s assets come due or bonds are redeemed, Euroclear puts the cash into a bank account. This account is now home to roughly €132bn. Last year it earned a return of €4.4bn, which conveniently belongs to Euroclear, as per the clearing-house’s terms and conditions.Western policymakers are now considering whether these assets can be used to help Ukraine. Russia might one day have to compensate the country for war damages, which the World Bank already puts at more than $480bn. Ukraine now needs money and weapons to push back Russian advances, as well as to maintain its state and economy. At the same time, Western governments are increasingly struggling to find room in their budgets to support the war effort, as well as to get approval from legislatures for such spending. On February 26th Dmytro Kuleba, Ukraine’s foreign minister, once again argued that Russia’s assets should be confiscated. A day later Janet Yellen, America’s treasury secretary, called on her colleagues “to unlock the value” of those funds. Ursula von der Leyen, president of the European Commission, wants to use Euroclear’s windfall to buy military kit for Ukraine.How exactly could this be done? Taking assets from someone usually requires a court order, but in international law things are a little more complicated. The International Court of Justice would only be able to rule on the matter should Ukraine and Russia agree to let it decide upon reparations, which is unlikely at present. The UN Security Council has the ability to pass binding resolutions, over which Russia unfortunately holds a veto.Some, including Lawrence Summers, a former American treasury secretary, want to make use of states’ right to take so-called countermeasures. These are otherwise unlawful actions that are sometimes allowed in response to unlawful acts. That Ukraine is entitled to deploy countermeasures is undisputed. How broadly the same rules apply to those acting in support of Ukraine is more controversial. Sanctions and asset freezes fall under the category, and have been widely used against Russia. Asset confiscations do not, at least in most interpretations of international law. That is because they are irreversible and would seek to punish Russia, not induce a change in its behaviour.As Lee Buchheit, a veteran of international law, notes, the problem reflects a geographical mismatch. Ukraine has strong claims on Russia, but no frozen Russian assets it could use to settle them. The West has no claims but plenty of assets. Thus the challenge is to find a way to match these assets and claims.In a recent paper, Mr Buchheit and co-authors suggest just such a way. They argue that the West could provide a loan to Ukraine, in return for which Ukraine could offer its claims on Russia as collateral. The West would agree to use only this collateral for redemption of the loan. When Russia inevitably refuses to pay up, the West would then be able to foreclose on the collateral.Would this work? One difficulty is that an international body would still have to determine precisely how much Ukraine is owed. Perhaps the UN General Assembly could enlist the World Bank to crunch the numbers. But this would require careful diplomacy on behalf of the West, as well as the support of France and Germany, which have so far been unimpressed by suggestions involving creative interpretations of international law. Mr Buchheit argues the shift in approach is not quite as big as it might appear at first. The West has already gone quite far by freezing assets and making clear that it will not give them back unless reparations are paid. As he notes: “Russia won’t pay reparations. War reparations are paid by the vanquished to the victor, and this situation does not end with the Ukrainian flag flying over the Kremlin.” In effect, he argues, the West has already taken the assets.A second difficulty is posed by Belgium, which has access to most frozen Russian assets and would therefore need to receive most of the claims against Russia from Ukraine. It might be reluctant to play such a pivotal role, given the potential for retribution. It would also be unfair to expect a country of its size to be the main provider of the initial loan to Ukraine. In order to overcome this difficulty, Mr Buchheit suggests that the initial loan to Ukraine is set up in a syndicated manner with a sharing clause, which would enable lending countries to group together both when providing the money and receiving collateral. Such an approach was adopted to fund emerging-market governments in the 1970 and 1980s before bond-financing markets took over. Just as is the case now, a mechanism was needed to share risk and access to collateral.Gold rushBut perhaps, after all the debate, there is no need to seize Russian assets. Indeed, the EU is already planning to implement a windfall tax on any profits they accrue. If returns continue to be siphoned off indefinitely, the difference between confiscating the asset and a windfall tax becomes smaller and smaller. In economic terms, the West is already the owner of Russia’s assets. All that is left now is to fund Ukraine’s fight. ■ More

Webull is planning to go public through merging with a special purpose acquisition company.
Special purpose acquisition companies, or SPACs, raise capital in an initial public offering and use the cash to merge with a private company and take it public, usually within two years.

The Webull logo is displayed on a smartphone screen.
Rafael Henrique | SOPA Images | LightRocket | Getty Images

Webull is planning to go public through merging with a special purpose acquisition company in a deal that values the digital investing platform at $7.3 billion.
The New York-based online brokerage will combine with SK Growth Opportunities Corporation in the second half of the year, pending regulatory and shareholder approvals. The combined company will be listed on Nasdaq as Webull under a new ticker.

Stock chart icon

SK Growth Opportunities (SKGR), YTD

Special purpose acquisition companies, or SPACs, raise capital in an initial public offering and use the cash to merge with a private company and take it public, usually within two years.
After suffering a drought over the past two years, the space is showing signs of a revival as the bull market powers on and interest rates start to stabilize.
Webull launched its trading platform in the U.S. in 2018 and enjoyed a huge boost during the Covid-19 pandemic as many Americans became first-time traders during lockdowns. The firm had $370 billion in equity notional volumes and 430 million options contracts traded through its platform in 2023.
Compared to its competitor Robinhood, Webull’s clients tend to be more active and advanced investors, using analytical tools such as charting to decide when to enter and exit their trades, CEO Anthony Denier said in a CNBC interview in 2021.Don’t miss these stories from CNBC PRO: More

An AT&T service outage impacted tens of thousands of customers on Feb. 22.
The company said it would automatically apply a $5 credit to the accounts of impacted consumers.
Consumer advocates suggest customers ask for reimbursement in the event of future blackouts from phone and internet providers. They don’t have to apply refunds automatically.

A cellular tower is seen on Feb. 22, 2024 in Redondo Beach, California. The outage affected tens of thousands of customers in cities across the country whose phones lost signal overnight.
Eric Thayer | Getty Images News | Getty Images

‘It won’t be our last’

AT&T’s outage on Thursday knocked out service for tens of thousands of customers, who were unable to use their phones without access to Wi-Fi. It was the result of an internal company error — not a cyberattack — as AT&T worked to expand its network, it said.

AT&T is crediting consumers and small business customers “most impacted by the outage” to “compensate them for the inconvenience they experienced,” company CEO John Stankey wrote in a letter Sunday.

“This is not our first network outage, and it won’t be our last — unfortunately, it’s the reality of our business,” he wrote.
AT&T is crediting the average cost of a full day of service, it said.
The credit doesn’t apply to AT&T Business Enterprise and Platinum accounts, AT&T prepaid or Cricket, its low-cost service, the company said. Impacted prepaid customers “will have options available to them,” Stankey said, though didn’t elaborate.

Don’t wait for your provider

“My advice to consumers is, if you were impacted by this, don’t wait for AT&T to make the determination” as to whether you qualify for a credit, said John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers League.
“Call and say, ‘I was impacted by this. I want to make sure I get the credit,'” he added.
Consumers who don’t want to call customer service may also be able to interface with a provider’s online portal or chatbot for speedier resolution, he said.

Of course, phone and internet companies apply such credits voluntarily, Breyault said. By contrast, federal law that governs the airline industry entitles consumers to a refund in cases of flight cancellations, for example. A similar consumer protection doesn’t seem to exist in the wireless arena, Breyault said.
The Federal Communications Commission in January proposed a rule that would require rebates for consumers who face programming blackouts on cable or satellite television subscriptions.
“It’s a time thing” for consumers to ask for a reimbursement, Weinstock said. “But I think it’d be worth it to always contact your carrier to say, ‘I had an outage. It wasn’t my fault, you owe me money. You should cover the cost of this.'” More

China is beefing up national security measures by expanding its protections of state secrets to include a broad category of “work secrets.”
The new rules, set to take effect May 1, describe how precautions taken for state secrets should also apply to unclassified information known as work secrets.
That article on work secrets “is the most problematic,” said Jeremy Daum, a senior fellow at Yale Law School’s Paul Tsai China Center, noting “there is a risk that individual departments will overzealously identify matters as ‘work secrets.'”

A Chinese flag flutters on top of the Great Hall of the People ahead of the opening ceremony of the Belt and Road Forum (BRF), to mark 10th anniversary of the Belt and Road Initiative, in Beijing, China October 18, 2023.
Edgar Su | Reuters

BEIJING — China is beefing up national security measures by expanding its protections of state secrets to include a broad category of “work secrets.”
Chinese President Xi Jinping on Tuesday signed an order to formally adopt revisions to a law on “Guarding State Secrets,” according to state media, which reported that legislators passed the updated law at a meeting earlier that day.

The new rules, set to take effect May 1, describe how precautions taken for state secrets should also apply to unclassified information known as work secrets. The law broadly defines work secrets as information that would result in an “adverse impact” if leaked, and said specific measures would be released separately.
That article on work secrets is “the most problematic,” said Jeremy Daum, a senior fellow at Yale Law School’s Paul Tsai China Center.
“There is a risk that individual departments will overzealously identify matters as ‘work secrets,'” Daum said. He also founded the website China Law Translate, which published an unofficial English translation of the new rules.
“This limits the public right to know and also exposes people to potential liability.”

For foreign businesses, it’s the lack of clarity that will remain an unquantified risk to doing business in China.

Jeremy Daum
Yale Law School’s Paul Tsai China Center

While China regularly discloses a certain amount of information about government plans and economic data, the country is often considered more opaque relative to many developed countries.

For example, high-level officials in China have disappeared from public view without formal explanation. Policies, even those that support businesses, don’t always come with specific implementation dates.
Last year, new Chinese laws on espionage and foreign policy included catch-all phrases such as “state secrets” that were left open to interpretation by authorities. Separate rules on what kinds of data foreign businesses in China can send out of the country have yet to provide formal clarity on what qualifies as “important data” and thus subject to export restrictions.

“For foreign businesses, it’s the lack of clarity that will remain an unquantified risk to doing business in China,” Daum said.
“The addition of work secrets, and mention of information that becomes secret only after being aggregated with other information, all creates concern that one might accidentally infringe secret information,” he said.
“In practice however, protection of state secrets has previously been stretched to encompass seemingly benign situations, and foreign businesses have still remained.”

Growing national security concerns

The updated state secrets law comes as Beijing and Washington increasingly cite national security risks when announcing new restrictions for business.
“The new law will add to a general sense among the foreign business community that the Chinese leadership’s preoccupation with national security has made the country’s operating environment more difficult,” said Gabriel Wildau, managing director at consulting firm Teneo.
“China’s economic growth outlook remains the key factor influencing foreign investment decisions, but the secrets law adds another disincentive at the margin,” he said.

The rules designate state secrets as information that, if leaked, “might harm” China’s security and interests in politics, economics, national defense, foreign affairs, technology and other fields, according to China Law Translate.
The law also retained restrictions for overseas travel by people currently or recently working with state secrets.
“I don’t know that their coverage will be meaningfully expanded by the revisions, but the holistic view of national security, a theme running through this law and other recent security laws, has generally placed some barriers on travel,” Daum said.
“A document on counter-espionage precautions released a few years back, required a wide range of persons traveling in their professional capacity to have briefings on security prior to departure.”

The final version of “Guarding State Secrets” has been under government discussion for months.
The revised law provides a “strong legal guarantee for better protecting national sovereignty, security and development interests,” Li Zhaozong, director of the Central Security Office and the National Administration for the Protection of State Secrets, wrote Wednesday in an article published by People’s Daily, the Chinese Communist Party’s official newspaper. That’s according to a CNBC translation.
Li noted how it’s important to disclose information that should be made public, while ensuring confidentiality as needed. The article did not mention work secrets.
China’s National People’s Congress Standing Committee passed the final version of the updated state secrets law after considering a round of revisions in October. The law was initially adopted in 1988.
Daum pointed out that many of the changes in the new rules are “updates for new technology and style changes.”
“The law offers clarity in a few areas, limiting liability of leadership in some instances, and providing compensation for persons whose rights have been limited due to secrecy requirements,” he added.
The National People’s Congress is set to kick off its annual meeting next week, during which the country’s top leadership will release its economic plans and outlook, as well as outline key policies. More