To the extent privilege applies in the PRC, it can be argued that both situations are protected.
In-house lawyers who are not admitted to the local bar or are not registered with PRC's Ministry of Justice do not appear to fall within the scope of lawyers in the PRC who have a confidentiality obligation. They are not regarded as qualified lawyers and cannot engage in private practice.
Current PRC laws and regulations indicate that in-house lawyers in the PRC are different from outside counsel and, therefore, lesser confidentiality obligations apply to the documents and communications which they undertake with their clients.
This is unlikely to be the case.