For years, Chinese leaders have welcomed foreign firms to help pull the country’s economy and tech companies into the digital age. At the same time, they’ve tried to manage the flow of ideas and information into, out of and across the country, while protecting sensitive economic sectors. But recent evidence suggests that security hard-liners are now winning an internal political fight to establish greater state control of information and data. There are still senior officials who want to use wider exposure to market competition to empower innovation and enable entrepreneurship in areas including China’s tech sectors. But as economic growth has slowed over the past couple of years–a reality driven home by the government’s decision on Aug. 11 to devalue China’s currency–the state has become much more cautious.
First, a sweeping national-security law, announced on July 1, gives Beijing new powers to crush online dissent and restrict foreign access to economic sectors deemed essential for China’s economic and social stability. A week later, officials released the full text of a new draft cybersecurity law that will expand the government’s authority to control data, networks and information. When the law is passed (likely next year), foreign companies will be forced to store data on their Chinese customers inside China and contend with security audits and pressure to turn over source code.
The cybersecurity law will also have a chilling effect on privacy in China by building a single nationwide ID system that ties the online identity of citizens to their physical identity. Chinese officials insist that anonymity online allows terrorists and criminals to operate in the shadows–and that anonymity must be eliminated to protect Chinese citizens. Foreign companies will have to help manage these threats–even when they don’t agree with Beijing on what constitutes “terrorism” or a legitimate threat to national security. The cybersecurity law also provides a legal basis for the government to shut down the Internet in the event of serious social unrest.
China’s leaders know that censorship can’t work forever. But even if they can’t fully eliminate freedom of online speech, they can limit freedom of online assembly. That’s the more immediate domestic threat to the party’s political supremacy.
None of this should come as a surprise. A free and open Internet will never be compatible with authoritarian government and the state-managed variety of capitalism. But these latest changes provide another useful reminder that when risk rises, China’s leaders will always choose political stability over economic innovation.
This appears in the August 24, 2015 issue of TIME.