HomeOppression and Human RightsChinese Authorities Raid Multiple Offices in Crackdown on Consulting Industry

Chinese Authorities Raid Multiple Offices in Crackdown on Consulting Industry

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China has conducted a nationwide operation to crack down on international advisory firm Capvision, with state security authorities raiding multiple offices and questioning its employees. The company was a so-called expert network that connected clients with people who provided specialist knowledge largely in mainland China. The raids were part of a broader crackdown on the consulting industry, as Beijing tightens control over what it considers sensitive information related to national security. While the report did not give an exact date of the raid, the police accused Capvision of posing a significant risk to China’s national security, as the company frequently contacted personnel with access to classified information in the Chinese Communist Party and government, as well as in industries such as national defense and science.

Capvision is headquartered in Shanghai and New York and is a growing list of global consulting companies that have been ensnared in Beijing’s widening crackdown on what it perceives as national security risks. In the past few weeks, Chinese authorities have questioned staff at the Shanghai office of US consultancy Bain & Company, closed the Beijing office of Mintz Group, an American corporate due diligence firm, and detained five of its local staff.

The crackdown on foreign consultancies comes as China’s government is trying to woo foreign investment to help revive its slowing economy after three years of self-imposed Covid isolation. The recent raids have raised alarms in the international business community, as foreign companies start to see their actual operations on the ground being interfered with and interrupted. This development creates concerns for the foreign executives about doing business in China and seeing it as a safe and favorable place to do business and grow. Shehzad Qazi, chief operating officer and managing director of data and advisory firm China Beige Book, said that “clamping down against foreign companies and raids are going to make it harder for Beijing to convince foreign executives that not only is China a safe place to do business, but a good place to do business and grow, and a place for opportunity.”

The legal risks for foreign companies to operate in China are growing. Last month, China broadened the scope of its already sweeping counter-espionage law to expand the definition of espionage from covering state secrets and intelligence to any “documents, data, materials or items related to national security and interests,” which further spooked foreign businesses. The consulting industry has fallen into the crosshairs in particular. State security authorities will strengthen law enforcement against illegal consulting activities that endanger national security based on the counter-espionage law, police told the TV station.

In a separate report, Chinese state broadcaster CCTV said national security authorities found that overseas institutions have used domestic consulting firms to steal state secrets and intelligence on China’s key areas in multiple investigations. In the report, Capvision was singled out as a “leading company” in the industry. Capvision offers consultations to over 2,000 clients and boasts a network of more than 450,000 experts, according to its website. Started by former Bain consultants and Morgan Stanley investment bankers, the company charges just over $1,000 per hour for speaking with an expert in its network and keeps the majority of the fee. According to a former client, Capvision is the top name in expert networks in China.

The recent crackdown on foreign consultancies is also reflected in the American Chamber of Commerce in Shanghai’s statement expressing concern over the investigations of US due diligence and consulting companies in China. Its president, Eric Zheng, said, “It would be helpful if the authorities would more clearly delineate the areas in which companies can or cannot conduct such due diligence.” The consultancy industry, which is now under scrutiny in China, has grown substantially in the country, and some companies have ignored national security risks and failed to fulfill their responsibilities and obligations of counterespionage.

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