China formally arrests Japanese man over ‘espionage’. What could be the consequences?

China has formally arrested a Japanese man detained in March on suspicion of espionage, Japan’s foreign ministry confirmed Thursday (Oct 19).

The man, who has been living in China for the last 20 years, was an employee of a Tokyo-based pharma company, Astellas Pharma.

“We have confirmed that the Japanese national in question has been arrested, but we have strongly appealed to the Chinese side for his early release through various levels and opportunities,” Japanese Chief Cabinet Secretary Hirokazu Matsuno said at a press conference.

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China’s allegations

China accuses the Japanese man of violating the country’s strict criminal code. Chinese Foreign Ministry spokesperson Mao Ning said on Thursday that the Japanese citizen “was suspected of espionage and was subject to criminal compulsory measures taken by the relevant Chinese authorities in accordance with the law.”

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The Japanese authorities have not revealed more details about the detained person, including his name or the place where he is kept.

The development comes amidst an ongoing crackdown on international consulting firms on national security grounds in China.

Ramifications

China’s actions might end up further jeopardising economic environment in the world’s second-largest economy, which could further fuel the West’s decoupling from the communist nation.

In July, China imposed a fine of approximately $1.5 million on the Mintz Group, a US corporate due diligence firm, for purportedly engaging in unauthorised statistical activities within the country. As a consequence, Chinese officials shut down the group's Beijing office in March and apprehended five of its local staff members.

In May, the state security authorities revealed that they had conducted raids on multiple offices of Capvision, an advisory network. This announcement came a month after law enforcement authorities had questioned employees at the Shanghai office of the consultancy firm Bain.

This situation has posed challenges for foreign businesses, some of which were already encountering difficulties in persuading their employees to relocate to China.

Falling FDI

As a result, foreign investors are dragging their feet on further investments in China. Foreign direct investment (FDI) in China fell 5.1 per cent from a year ago.

Direct investment liabilities, a measure of FDI reflected in a country’s balance of payments, fell to just $4.9 billion in the April to June months (the lowest since 1998), according to data published in August by the State Administration of Foreign Exchange.

(With inputs from agencies)

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