China's state secret laws are "complex and opaque" and reinforce the rule of the Communist Party, a report published by Human Rights in China says.
China has been criticised for its secrecy over bird flu and Sars
Extensive restrictions not only affect the rights of ordinary people, but also have an impact on businesses and global policymakers, according to the report.
A culture of secrecy means it is often difficult for people to know for sure when they are violating a law, it adds.
China brushed aside the criticism, saying its citizens come first.
The rights group report, entitled State Secrets: China's Legal Labyrinth, said information is currently closely guarded in China.
"The state secret system allows large amounts of information to be classified as state secrets," said the report from the New York-based rights group.
"(It) employs extensive technology, police and social controls to monitor the flow of information, and places it all under political reins," it added.
The rights group said China's National Administration for the Protection of State Secrets can classify any information it desires as secret - even if it has already been made public.
"Combined with the one-party regime, and the absence of an independent rule of law, (this) allows further consolidation of political and social control by the ruling elite," the report said.
It added that limiting people's right to know could have a harmful effect on Chinese society.
As an example it cited the outbreak of Severe Acute Respiratory Syndrome (Sars) in China in 2003, which the authorities initially tried to cover up.
Not releasing health information could lead to an increase in the number of people affected.
Just this year, the World Health Organisation complained that China was not sharing all its information on the different strains of bird flu in the country.
Human Rights in China also suggests state secret laws are used to imprison people who it considers troublesome.
Tan Kai, a computer repair technician, was sent to prison for 18 months last year for "illegally obtaining state secrets" while backing up party computer files, the report said.
Human Rights in China suggested the real reason for his imprisonment lay in the fact that he is an environmental campaigner.
Chinese Foreign Ministry spokesman Qin Gang later insisted "citizens enjoy freedom of speech in accordance with the law".
"Only when citizens violate laws will they be punished," he added.
China is in the process of reforming its state secret system.
In April, it said it would introduce a range of regulations next year to boost transparency by increasing the amount of information published by government departments.
For example, it wants to give more information on government land acquisitions and compensation given to residents forced to move out of their homes.
Ordinary people should also have more information about public health issues, and food and drug safety, the government said.
However, it said information should not be released if it harms "state security, public safety, normal economic operation and social stability".