China has launched a nationwide anti-spy crackdown on consulting firms, according to state media, as Beijing moves to tighten foreign access to sensitive information amid growing tensions with the US.
On orders from China’s central government, authorities carried out synchronized operations in cities including the financial powerhouses of Beijing, Shanghai, Shenzhen and Suzhou, a provincial TV channel in Jiangsu province reported Monday night. The state broadcaster didn’t say where it got the information or provide a timeframe for the raids.
State security officials in Suzhou, a city in the province that neighbors Shanghai, visited the local branch of Capvision, a consulting firm with headquarters in New York and Shanghai, the broadcaster said. Capvision employees were questioned and some items were searched and seized, according to the report, which didn’t identify whether other firms were also targeted.
Capvision said in a statement posted to its WeChat account on Monday evening that it will resolutely stick to national-security policies and take the lead to guide the healthy development of the consulting industry.
Investors operating in China are facing an increasingly challenging environment, despite Premier Li Qiang’s recent vow to establish a “broad space” for foreign companies in the nation. The government last month passed a vague new counter-espionage law that expanded the list of activities which could be considered spying, intensifying the risks for foreign firms.
US consultancies — often used by overseas investors and multinational companies to conduct due diligence and research in China — are particularly in the spotlight. In recent weeks, authorities have questioned staff at the China offices of US consultancy Bain & Company and targeted New York-based due-diligence enterprise Mintz Group.
“Foreign companies need to assess whether the work they’re doing in China might be viewed as supporting a hostile agenda,” said Gabriel Wildau, managing director at advisory firm Teneo Holdings LLC in New York. “Information that on its face doesn’t appear sensitive or relevant to national security might be viewed as such if it’s used in the context of providing advice in service of an anti-China or pro-decoupling agenda.”
It’s not clear where the red lines are, so any work that sits in a gray area should probably be performed outside China, Wildau added. “My sense from the recent incidents is that Chinese staff and long-term expatriates are at greater risk than visiting executives,” he said.
State Secrets
The domestic consulting industry has exploded in recent years and spawned national security risks, the Jiangsu TV report said. Consultancy firms have illegally acquired sensitive data through frequent contact with government and defense sector employees with access to state secrets, it added, citing a police officer it didn’t identify.
“Some consulting and investigation agencies are one-sidedly pursuing the rapid growth of business scale, but ignoring possible national security risks,” the report said.
State broadcaster CCTV separately reported on Monday that some consulting firms, including Capvision, had ignored national security risks and deliberately “selected, lured and hoaxed experts and scholars in sensitive industries to provide internal information” involving secrets. By doing so, companies ended up becoming accomplices in spying on “state secrets and intelligence for foreign intelligence agencies,” the CCTV report said.
The consultancy crackdown is part of a broader move by Beijing to curtail access by overseas firms to Chinese data sources. That push is a response, in part, to a series of reports that alarmed officials written by US research institutions drawing on once publicly available or open-source materials, the Wall Street Journal reported this week, citing people with knowledge of the matter.
Chinese services such as Wind Information Co. in recent months stopped providing detailed data on the nation’s companies to overseas clients. The Cyberspace Administration of China, the country’s powerful internet overseer, also notified data providers in March to restrict overseas access to sensitive information such as patents and statistics, the Journal reported, citing people who have consulted with Chinese authorities.
Registry databases at Qichacha and TianYanCha — companies that provide similar services — have also been inaccessible for some time to users outside mainland China, according to several people familiar with the matter.
--With assistance from Li Liu, Jacob Gu, Lucille Liu and Jon Herskovitz.
(Updates story throughout.)
