Bain Consulting Firm Is Latest Target of Chinese Crackdown

Authorities visited the Shanghai office of U.S. management consulting firm Bain & Company earlier this month to interview employees.

In a written statement, Bain said it was “appropriately cooperating with Chinese authorities,” but declined to comment on the nature of the investigation and whether employee phones and computers were seized during the visit. bottom.

The Bain interrogation comes a month after authorities detained five Chinese nationals who worked in Beijing for the Mintz Group, an American consulting firm with 18 offices around the world, and closed its branch. It was done shortly after. The five Chinese were detained overnight before being notified by their families that they had been detained. China’s Ministry of Foreign Affairs later said the company was suspected of engaging in illegal business activities.

Mintz did not immediately respond Thursday to a request for comment on whether the five employees had been released.

A company that buys or invests in a factory or another company usually hires a company like Mintz to do what is known as a due diligence review to make sure there are no hidden issues with the target company. increase. Bain, by contrast, offers corporate advice. Companies can share sales, operational and long-term planning details with Bain to get an independent perspective on how to improve.

The raid on Bain’s operations in Shanghai is the latest sign of strained economic relations between the United States and China. Beijing is particularly reeling from restrictions imposed by the Biden administration that bar the sale of critical semiconductor manufacturing equipment to China. Without critical chip-making tools, China’s semiconductor industry, already considered a technological laggard, has narrowed the gap with the major players and has expanded into everything from military equipment to consumer electronics. You will struggle to gain access to the cutting edge technology used.

The Chinese government is also unhappy with the arrest of two men in New York City by U.S. law enforcement officials, who are operating an unlicensed Chinese police outpost to intimidate and control Chinese citizens. accusing them of helping to American prosecutors have also indicted 42 Chinese police officers and other officials, accusing them of various actions against American dissidents. The Ministry of Public Security Wednesday accused US prosecutors of “maliciously fabricating” and “totally fabricating” the indictment.

“If the United States continues to pursue its own path, China will resolutely oppose it to the end,” the ministry said.

U.S. Treasury Secretary Janet L. Yellen called for constructive and healthy economic relations between the two countries in a speech last week, which appeared to be aimed at lowering the temperature of ties across the Pacific. She specifically said the US need not “decouple” its economy from China, and China’s growth need not come at the expense of US economic leadership.

The U.S. Embassy in Beijing and the U.S. Chamber of Commerce in Shanghai declined to comment on questions of Bain employees.

China is targeting advisory firms because the country’s highest legislative body has approved a revised Espionage Law that expands the list of activities that constitute espionage. The revised anti-espionage law passed Wednesday has put foreign companies on guard because normal business activities could expose executives and employees of foreign companies to espionage targets.

It is common business practice for companies to research the local market and conduct background research on potential partners and competitors before investing money.
We often use advisory firms like Mintz and Bain to help us with that work.

China’s scrutiny of prominent U.S. companies sends a mixed message after Chinese economic policymakers called for more foreign investment last month. It is worrisome that the economic pragmatism that contributed to the

Foreign companies have been particularly hard hit by China’s draconian ‘zero-corona’ policy over the past three years. The policy frequently disrupted business, nearly halted economic growth, and prevented foreign executives from visiting domestic employees and offices.

Chinese Premier Li Qiang told a forum of foreign business leaders last month that China was striving to create a “market-oriented, rule-of-law and internationalized” business environment. He said he would continue to open up the economy “no matter how the international situation changes”. National CCTV News.

It’s not clear if Beijing is targeting actual consulting firms or high-profile clients they advise in China’s difficult business environment.

financial times report firstciting people familiar with the situation, Chinese police raided Bain’s office multiple times, removing computers and phones but not detaining employees.

A police raid in China against a US advisory firm poses a difficult legal dilemma for the firm. The Chinese government sometimes imposes gag orders in connection with attacks.

Multinational companies typically share confidential information with advisory firms under confidentiality agreements. Confidentiality agreements require clients to be notified if any of their data has been compromised. As such, raided companies face conflicting legal obligations to the Chinese government and their customers.

Many global companies doing business in China seek to shut down their computer systems outside of China to limit the potential loss of trade secrets and other valuable data.

Claire Who Contributed to research.

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