The law is also just part of a slew of reforms Xi has pushed in order to regulate the information pouring out of China in the name of national security.ĭata from the Mercator Institute of China Studies shows that the country’s State Council has released 21.5% fewer policy documents to the public than it did in 2015. Hart says the lack of transparency over why consulting firms have been cracked down on is making it difficult for businesses to navigate what’s illegal and what’s not. It may be too early to tell if the anti-espionage law’s enactment will dent future business confidence in China, Ashton says, but if more foreign businesses are targeted in the campaign and employee detentions increase, then the deterrent effect will be “more significant.”īut the spring raids on due diligence firms have already started to create a chilling business environment. The revised law may be “particularly tricky” to navigate, says Anna Ashton, director of China Corporate Affairs and U.S.‑China at risk consultancy Eurasia Group, when collecting and sharing data on high-tech industries that intersect with national security and competitiveness or if there are potential implications on human rights: “It will be harder for companies to rely on business intelligence firms to help them ensure that, for example, their supply chains are free of forced labor or their high-tech products are not being transferred to military end-users.”Ĭhinese state media covered one example of how the law could play out: a Chinese citizen in Shenzhen who ran a consulting firm was sanctioned after cooperating with a foreign NGO in conducting a detailed audit of human rights-related supply-chain issues in Xinjiang. ![]() National Counterintelligence and Security Center, also said in a bulletin that the uncertainties in the law can extend to journalists and academics in their daily work. ![]() “Some things that companies used to consider to be basic, economic data, or production data, there is the interpretation that some of this could be considered national security,” Hart adds. “Our view, all new investment requires due diligence,” Hart says.īut the anti-espionage law is a growing cause for concern. ![]() These firms scope out the environment before they do business there, and part of their job is gather data and intel on major business investments, mergers and acquisitions that could affect their decisions. “The combination of these things has made people a little bit more concerned about data in general, transparency around how you could transgress rules.” The importance of consultancies and due diligence firmsīusiness intelligence and due diligence firms are crucial to entering business in China, especially to foreign companies. ![]() “There’s just a big question mark right now, over how welcome investment is,” Hart says. Deloitte and a number of its employees were fined the same month for faulty audits. firm Mintz, known for business-related background checks and intel gathering, was raided and five Chinese staff members were detained, with a foreign ministry official saying that the company was suspected of engaging in “ illegal business.” Police also visited Bain & Co’s Shanghai office in April, with the Financial Times reporting that they took away company phones and computers. Last year, state police raided the China offices of consulting firm Capvision for alleged “espionage” activities.
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