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As China attacks US companies and arrests workers, corporate landscape becomes ‘very risky’

As China attacks US companies and arrests workers, corporate landscape becomes ‘very risky’

 


The risks of doing business in China are increasing for foreign companies. The offices of Capvision, a consulting firm with offices in New York and Shanghai, and two US companies have been raided in recent weeks as Chinese authorities exercise their power under a new security law.

Police showed up unannounced at Capvision’s Chinese offices in early May, raided the premises and questioned the employees.

Earlier this spring, US firms Bain & Company and Mintz Group also had their Chinese offices raided. Five of Mintz’s Chinese employees were arrested.

The three companies have done business by collecting information on Chinese companies for US investors.

A still from video released on China’s state-run CCTV network shows authorities conducting an investigation at the Shanghai office of international consulting firm Capvision Partners, May 9, 2023. Reuters/CCTV

After the Capvision raid, Chinese state television even aired a special report alleging, without presenting hard evidence, that the company had lured Chinese citizens into divulging state secrets.

Capvision kept its response to the raid low-key, saying on social media that it would “review its practices”, under the guidance of Chinese security authorities.

But James Zimmerman, a business lawyer who works in Beijing, told CBS News the raids scared off foreign companies.

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“Everything is a threat, you know,” Zimmerman said. “Unfortunately, in that kind of environment, it’s very difficult to operate – when everything is considered a matter of national security and…it seems like…everything you do could be considered espionage.”

Billionaire Twitter and Tesla boss Elon Musk was adored during his visit to China last week. He had a meeting with the Chinese vice premier and was enthusiastically greeted by employees at his Tesla factory in Shanghai.

He and other big players in China, including the bosses of US giants like Apple and Starbucks, may be untouchable, but smaller businesses are worried.

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“A lot of people are starting to, you know, rewrite their strategic plans just because of the tension,” Zimmerman said, noting that the growing crackdown by Chinese officials “makes it politically very risky for them.”

Paradoxically, China recently launched a campaign to attract new foreign companies. But many investors are cold-eyed. A new counterintelligence law is due to come into force on July 1 and they fear it could be used as a political weapon to punish certain companies by redefining legitimate due diligence as espionage.

More Elizabeth Palmer

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2/ https://www.cbsnews.com/news/china-raids-arrests-us-business-capvision-bain-mintz-group-security-crackdown/

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