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Kevin Garratt and his wife, Julia, are facing accusations by Chinese authorities of espionage and stealing state secrets.The Vancouver couple owns a coffee shop in Dandong, China.Jack Chen/The Globe and Mail

A Canadian couple living on the border with North Korea is being investigated by Chinese authorities for stealing military and defence secrets.

For years, Kevin and Julie Garratt ran Peter's Coffee House, named after the couple's youngest son, in Dandong, a Chinese city across the Yalu River from North Korea. The cafe was opened in 2008, after Mr. and Ms. Garratt moved to northeastern Dandong after previously working as teachers in southern China.

But on Monday, the Vancouver couple – who have been living in China since 1984 – stood accused by Chinese authorities of espionage and stealing state secrets. Their immediate whereabouts were unknown and calls to their coffee shop went unanswered.

A brief report on the official Xinhua newswire said only that "two Canadian nationals are under investigation for suspected theft of state secrets about China's military and national defense research" and that "the State Security Bureau of Dandong City, northeast China's Liaoning Province, is now investigating the case in accordance with law."

Foreigners are rarely charged with stealing state secrets. Howard Balloch, a former Canadian ambassador to China who has spent decades in the country, could not recall a previous charge involving a Canadian.

But, he said, "unfortunately over the years we've seen the violation of secrecy laws in China often abused for other political reasons. And while I would view such a step as retrograde, I wouldn't be very surprised by it."

What constitutes a "state secret" is extremely nebulous in China, legally defined only as "matters that are classified as state secrets by the national State Secrets Bureau" – effectively leaving interpretation up to the authorities.

Nonetheless, theft of state secrets is a very serious crime in China, punishable with life in prison, or the death penalty in certain circumstances.

A spokesperson for the Department of Foreign Affairs, Trade and Development issued the following statement: "We are aware of reports that two Canadians have been detained in China. We are gathering information and monitoring developments closely. Canadian consular officials stand ready to provide assistance, as required. To protect the private and personal information of the individual concerned, further details on this case cannot be released."

Peter's Coffee House was a sensation in the city of Dandong, where it seemed everybody in town knew about the Canadians selling cappuccinos, hamburgers, cheesecakes and Western breakfasts with a view of the truck traffic that flowed back and forth across the China-North Korea border. Mr. and Ms. Garratt ran a weekly "English Corner" conversation club, where local Chinese could come to practise speaking English.

"It's the best food anywhere in Dandong and it's the only place for Westerners to hang out," said Gareth Johnson, founder of Young Pioneer Tours, which brings travellers in to North Korea. "It's pretty much the only place where you can get things like Dr. Pepper floats or root beer."

The walls of the café are lined with travel books, and a map marking the hometowns of those who had stopped in for a coffee and conversation.

The couple made a side business helping plan tours for those intrepid tourists who wanted to visit the Hermit Kingdom on the other side of the Yalu River. "We also can help you organize a trip over the border. Just ask," reads the Peter's Coffee House website.

Mr. Garratt, 53, also made a name for himself among Western journalists with his ability to take the measure of the often-tumultuous relationship between Beijing and Pyongyang just by looking out the window of his café.

In Canada, observers expressed shock over the Chinese investigation of the couple.

"It's completely unprecedented. We haven't had this sort of thing," said Charles Burton, a Brock University professor who served as a diplomat at Canada's embassy in Beijing in the early 2000s.

He pointed out that the arrests occurred less than a week after Prime Minister Stephen Harper and his top officials – for the first time – publicly implicated China in alleged acts of cyber espionage.

"Certainly the Harper government very explicitly and unambiguously indicated that the people that stole secrets were from China, that was something new," he said. "They explicitly outed the Chinese and the Chinese clearly don't like that."

A day later, Beijing's Foreign Ministry denied the charges. It is "irresponsible for the Canadian side to make groundless allegations against China when there is no credible evidence," a spokesman said.

Allegations of Chinese espionage against government and corporate targets in the West are not new – by all accounts, save for Beijing's own, such spying is rampant.

But what is new is a tendency for Western political leaders to call out China publicly for spying and point fingers at the Communist regime, even if doing so has consequences. For example, this spring, U.S. detectives laid their first ever criminal charges against a People's Liberation Army hacking group known as Unit 61396.

China broadly denied the allegations and then publicly accused the U.S. government and American companies of their own acts of aggressive espionage.

But "China has not responded with arrests, and that's even after the U.S. indicted PLA officers," said Adam Segal, director of the program on digital and cyberspace policy at the Council of Foreign Relations. "Targeting two coffee shop owners would seem to be disproportionate. I wonder if it's not just coincidence."

In China, several sources with close ties to North Korea and the borderlands area pointed to another potential reason for the arrests: Peter's Coffee House was frequented by Christians. Several cafes have in recent years been opened in cities near the border by people with missionary support and a desire to evangelize to North Koreans.

At least one of those cafes, Gina's Place Western Restaurant in Yanji, closed down July 15. A statement on the restaurant's Facebook page reminisced about better times helping to "train local workers. It was a beautiful time of working alongside beautiful people. During these moments it was easy to declare God's goodness."

But Gina's Place is now closed. It's not clear why: Two sources said it never achieved the commercial popularity of Peter's Coffee House. It may also have fallen under pressure from the Chinese government. Beijing remains an ally of Pyongyang, which has detained several American missionaries.

China itself has mounted a broad crackdown on religion in recent months, which may provide an alliance of interests. For the Chinese government, it may make sense to close down cafes if missionaries were "a big annoyance of a good friend of yours and it wasn't that big of a deal to you," one source said.

With a report from Colin Freeze in Toronto