China targets US firm in crackdown
SEOUL — In the latest official scrutiny of a prominent American business in China, authorities visited the Shanghai offices of the US management consulting firm Bain & Co. this month to question its employees.
In a written statement, Bostonbased Bain said it is “cooperating as appropriate with the Chinese authorities” but declined to comment on the nature of the investigation and whether its employees’ phones and computers had been seized during the visit.
The questioning at Bain came less than a month after authorities detained five Chinese nationals working in Beijing for the Mintz Group, a US consulting company based in New York with 18 offices around the world, and closed the branch. The five Chinese nationals were held overnight before their families were notified that they had been detained. China’s Foreign Ministry later said the company was suspected of engaging in unlawful business operations.
Mintz had no immediate response Thursday to a request for comment on whether any of its five employees had been released.
Companies that buy or invest in a factory or another company typically hire a business like Mintz to do what is known as a due diligence review, checking to make sure there are no hidden problems involving the target company. Bain, by contrast, provides corporate advice: Companies share details of their sales, operations, and long-term plans with Bain to obtain an independent perspective on how they can improve.
The raid on Bain’s operations in Shanghai is the latest sign of the strained economic relationship between the United States and China. Beijing is especially upset about restrictions imposed by the Biden administration preventing the sale of critical semiconductor-making equipment to China. Without critical chipmaking tools, China’s semiconductor industry, already considered a technological laggard, will struggle to close the gap on leading firms and gain access to cuttingedge technologies used in everything from military equipment to consumer electronics.
Beijing is also unhappy that US law enforcement authorities have arrested two men in New York City, accusing them of helping to run an unauthorized Chinese police outpost to intimidate and control Chinese citizens. American prosecutors also filed charges against 42 Chinese police officers and other officials, accusing them of various actions against dissidents in the United States. The Ministry of Public Security accused US prosecutors Wednesday of having “maliciously concocted” and “completely fabricated” the charges.
“If the US continues to go its own way, China will resolutely counter it to the end,” the ministry said.
Treasury Secretary Janet Yellen called for a constructive and healthy economic relationship between the two countries in an address last week that seemed aimed at lowering the temperature in the trans-Pacific relationship. She specifically said the United States does not need to “decouple” its economy from China and that Chinese growth does not have to come at the expense of US economic leadership.
The US Embassy in Beijing and the US Chamber of Commerce in Shanghai declined to comment on the questioning of Bain employees.
China’s targeting of advisory firms comes as the country’s top legislative body approved a revised espionage law that broadens the list of activities that would constitute spying. The amended counterespionage law, passed Wednesday, has alarmed foreign businesses because normal business activities could expose executives and employees at foreign firms to be marked as a spy.
It is a common business practice for companies to investigate local markets and do background research on potential partners or competitors before investing money. They often rely on advisory firms like Mintz and Bain to help.
China’s scrutiny of prominent US firms is sending a mixed message after China’s economic policymakers had pushed last month for more foreign investment.