China’s foreign companies on edge after national security probes | Business and Economics

Taipei, Taiwan – Foreign companies in China are on the tenterhook following a series of national security raids on consulting firms that have highlighted the risks of doing business in the era of Chinese President Xi Jinping.

Eric Zheng, president of the American Chamber of Commerce, said Tuesday that he was concerned about reports that due diligence firms were being targeted by authorities because „their work is essential to doing business in China.”

Chinese authorities should „more clearly define in which areas companies may or may not conduct such due diligence,” Zeng said in a statement.

„This will give foreign companies more confidence and help them comply with Chinese regulations.”

Zeng’s comments follow a similar warning from the U.S. Business Group last month that China’s recent expansion of espionage laws „dramatically increases the uncertainties and risks involved in doing business in the People’s Republic.”

EU Ambassador to China Jorge Toledo Albinana said on Tuesday that the law was „not good news” for those who want to see the Chinese economy open up further.

The EU Chamber of Commerce said in a statement that Beijing’s crackdowns „send a very mixed signal” as China seeks to restore business confidence following the abrupt end of its strict „zero COVID” strategy in December.

China’s CCTV has accused foreign consultancies of leaking state secrets to foreign bodies [File: David Gray/Reuters]

Authorities have opened an investigation into Capvision, a consultancy with offices in New York, Shanghai, Beijing, Suzhou and Shenzhen, for offering to share state secrets and sensitive intelligence with overseas companies, Chinese state media said on Monday.

In a lengthy press statement on Monday, CCTV said unspecified Western countries had „largely stolen” intelligence on key industries related to China’s military and economy and accused „foreign companies” of using consulting firms to gather sensitive information.

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The report accused Capvision of pressuring local experts to reveal company or state secrets on behalf of undisclosed clients, and a senior researcher at a state-owned firm was sentenced to six years in prison for spying on the consulting firm.

The investigation comes after Chinese law enforcement authorities last month questioned employees of US consulting firm Bain & Company and in March raided the Beijing office of New York-based Mintz Group and arrested five employees.

Capvision, Bain and Mintz, all based in the US, source information and data on Chinese companies for clients such as investment banks, hedge funds and private companies that invest in or do business in China.

Beijing has signaled its mistrust of foreign companies in recent months, expanding the country’s anti-espionage law in April to include all „documents, data, materials and items related to national security and interests.”

Although the revised law does not come into effect until July, it has already sent a chill through foreign businesses who have said they have been cut off from access to corporate records containing valuable information about Chinese companies.

While the latest investigations directly affect only a handful of foreign companies operating in China, the lack of transparency surrounding the probes has fueled concern across the foreign business community, said Nick Morrow, global trade and China analyst at the Economist Intelligence Unit.

„We understand that the Chinese authorities need to punish when violations occur. However, these actions occur with a high degree of opacity, and many people don’t know what’s going on, and we’re operating on rumors rather than facts,” Murrow told Al Jazeera. „That uncertainty is really about restoring that trust.” actually undermines the Chinese government’s efforts.”

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The American Chamber of Commerce in China has expressed concern over Beijing’s crackdown on foreign consulting firms. [File: Jason Lee/Reuters]

Chinese Premier Li Keqiang said March would be a „broad space” for international companies to operate in China and for foreign experts to return after pandemic restrictions and border controls are lifted.

China’s economy grew just 3 percent last year amid widespread lockdowns and travel restrictions, but GDP is on track to top Beijing’s 5 percent growth rate this year.

Chinese Foreign Ministry spokesman Wang Wenbin said on Tuesday that authorities were carrying out „normal law enforcement action” aimed at ensuring the „good development of the industry and safeguarding national security and development interests”.

The focus of the crackdown, particularly on American companies, comes amid strained relations between the United States and China, which are locked in a heated contest for geopolitical power and influence.

An AmCham survey in April found 87 percent of respondents were pessimistic about bilateral ties, even as 59 percent expressed a positive outlook on China’s economic recovery.

A foreign businessman working at a mid-sized consulting firm in China said most of his colleagues were less concerned about national security checks than the speed and shape of China’s recovery from „zero Covid” and burdensome regulation of private industry.

„I think people are very concerned about the government in China and what they are going to do next,” the person told Al Jazeera on condition of anonymity.

“There’s a lot of reluctance to go to China – not because of espionage, but because of last year’s lockdown that put a lot of pressure on high-income earners in China and concerns about how the general prosperity campaign is going to affect the rich. and successful companies.”

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„Our perspective is putting your IP at risk in China and that’s different from the recent news about companies doing due diligence on Chinese companies and selling information to Wall Street firms,” ​​the businessman added.

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