Home » Business » In China, the Police Came for the Consultants. Now the C.E.O.s Are Alarmed.
In China, the Police Came for the Consultants. Now the C.E.O.s Are Alarmed.
The China Development Forum, a high-profile, government-hosted conference with a who’s who of international executives in attendance, was a moment for Beijing to renew its efforts to win over foreign businesses.
Businesses from outside China “are not foreigners, but family,” said Wang Wentao, China’s commerce minister. State media reported that the chief executives of Apple, Pfizer and Procter & Gamble were at the forum, held in late March. Many of the dozens of business leaders there were on their first trip to China since the country had closed its markets to the world and derailed its economy with harsh Covid policies.
Mr. Wang pledged to remove obstacles preventing firms from investing more — 2023, he declared, was “Invest in China year.”
The good will did not last long.
The recent targeting of consulting and advisory firms with foreign ties through raids, detainments and arrests has reignited concerns about doing business in China. Executives, whether at midsize manufacturers or large corporations, are exploring how to reduce the threats to their businesses and protect their employees.
Over the last few years, as China has grown less business-friendly, some companies and investors were already starting to consider, for the first time in decades, whether the risks of investing in the country might outweigh the potential benefits.
The supply chain disruptions wrought by “zero-Covid” awakened companies to the downside of reliance on China. The geopolitical standoff between Washington and Beijing elevated the risk, forcing many multinationals to draft contingency plans for an alternative to China and to find ways to “decouple.”
And as Xi Jinping, China’s top leader, demands that Beijing bolster its national security and limit information to foreign governments and companies, some businesses are taking action.
Dan Harris, a Seattle lawyer who works with foreign companies in China, said he has heard from an unusually large number of businesses in recent weeks looking for ways to reduce their presence in China without leaving the market altogether.
One of his clients, a U.S. furniture manufacturer, is working on a deal to distribute its products through a Chinese firm so it can remove its American employees from the country. A U.S. education company, also a client, is shutting its China units and licensing its technology to its current Chinese employees. He declined to offer more detail, because he advises clients not to discuss leaving China until they are gone.
“The government in China is accelerating decoupling rather than trying to slow down,” said Andrew Collier, managing director at Orient Capital, an economic research firm based in Hong Kong. “If corporations feel that their operations are constantly open to incursion, they’re not going to be comfortable operating within that environment.”
Reports of raids or official security visits at prominent consulting firms in the last few months, including American outfits such as the Mintz Group and Bain & Company and most recently Capvision Partners, a consulting company with headquarters in New York and Shanghai, have raised alarm. Such firms help foreign businesses assess investments before they sink money into a company. They play a particularly crucial role in China, where reliable information is hard to secure and can come with a premium. Capvision disclosed in a regulatory filing two years ago that most of its expert researchers were paid about $200 per hour, with some making as much as $10,000 an hour.
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