A group of senior Republican lawmakers introduced legislation on 21 July that would treat all businesses based in China as instruments of the Chinese state under US federal law, significantly lowering the evidentiary bar for prosecutors pursuing economic espionage cases involving Chinese companies. The proposed Stop PRC Economic Espionage Act would also extend the same presumption to organisations based in Russia, Iran, and North Korea.

What the Bill Proposes

Under current US law, prosecutors must demonstrate that an alleged act of economic espionage was intended to benefit a foreign government, its agent, or a legally defined 'foreign instrumentality' — an entity substantially owned, controlled, sponsored, commanded, managed, or dominated by a foreign government. The new bill would eliminate that requirement entirely for companies headquartered in China, Russia, Iran, and North Korea, automatically classifying them as foreign instrumentalities. For all other countries, the existing evidentiary standard would remain in place.

The legislation was introduced by Senator John Cornyn, Senator Tom Cotton — Chairman of the Senate Select Committee on Intelligence — and Representative John Moolenaar, Chairman of the House Select Committee on China.

What the Sponsors Said

'There are no 'private' companies in China because they are — by law and design — beholden to the Chinese Communist Party,' Cornyn said while announcing the legislation. He described the bill as 'a commonsense fix to reflect that reality, account for the PRC's state-sponsored efforts to cheat and steal their way ahead in emerging tech, AI, and defense, and enable our government to prosecute without the burden of proving the obvious.'

Cotton argued that 'Communist China treats every business as an arm of the state,' adding that the bill 'would remove the requirement to show that a Chinese company is controlled by the Communist Chinese government.' Moolenaar said the legislation would 'update our nation's espionage laws and make it harder for spies and intelligence assets to escape justice based on the technicality of what counts as a foreign instrumentality.'

Broader Context: Washington's Tech Security Push

The bill arrives as Washington continues to tighten scrutiny over technology transfers, trade secret theft, and foreign influence operations linked to China. Over the past several years, successive US administrations and Congress have enacted measures to shield critical technologies — spanning artificial intelligence, semiconductors, quantum computing, and defence — from foreign adversaries. This legislation represents an attempt to strengthen the legal infrastructure underpinning those efforts, closing what sponsors describe as a procedural loophole that has complicated prosecutions.

Notably, the bill reflects a broader congressional consensus that existing espionage statutes have not kept pace with the nature of state-directed commercial competition, particularly from countries with mandatory national security cooperation laws.

China's Position

Beijing has consistently rejected US allegations that its companies function as extensions of the state or engage in state-directed economic espionage. Chinese authorities have accused Washington of politicising trade, technology, and investment issues, and have criticised a series of US restrictions targeting Chinese firms on national security grounds.

What Comes Next

The bill must clear both chambers of Congress before it can be signed into law. If enacted, legal analysts expect it to materially accelerate the pace of economic espionage prosecutions involving Chinese entities, removing what has historically been a difficult and resource-intensive element of proof. The legislation's extension to Russia, Iran, and North Korea also signals a broader legislative intent to codify adversary-nation presumptions across national security statutes.