A consulting firm, Bain, headquartered in the United States, announced the appointment of a new CEO who stated that due to heightened tensions between the United States and China, Beijing has increased scrutiny on Western companies operating in China. As a result, Bain will be withdrawing its consulting services for certain industries in China.
According to a report by the Financial Times on June 30, Christophe De Vusser will take over as the global CEO of Bain on July 1. In an interview with the Financial Times, he mentioned that the company will “reduce” its operations in “sensitive industries” in China.
“We will continue to operate in China within the regulatory and legal environment,” De Vusser stated. “From a geopolitical perspective, there are a number of sensitive industries at the core of the discussion. Therefore, in these industries, the frequency of our operations will indeed decrease.”
He did not specify which industries Bain would be exiting.
Despite adjusting its business operations in China, De Vusser added, “Do we know how the regulatory environment will evolve (in China)? I don’t think anybody really knows how it will evolve.”
De Vusser, a Belgian national, previously served as the head of Bain’s European private equity consulting business. Bain has approximately 19,000 employees globally. During his tenure at the helm of Bain, De Vusser emphasized that geopolitics will be one of the four key global trends shaping the company.
In April of last year, Chinese authorities raided Bain’s office in Shanghai, interrogating employees and confiscating computers and phones. Prior to that, China also conducted raids on the Beijing office of the U.S.-based due diligence firm Mintz Group, detaining five local employees. Capvision was also subjected to a surprise inspection by Chinese authorities.
These consulting firms are facing challenges amidst the heightened geopolitical tensions between the U.S. and China, as Beijing expands its already broad scope of espionage activities. In April last year, the Chinese Communist Party unveiled amendments to the “Counter-Espionage Law,” extending its application from national secrets and intelligence to include any “documents, data, information, or items related to national security and interests.”
As the political and economic environment in China deteriorates, not only are consulting firms struggling with their operations in China, but foreign enterprises across various industries are also leaving the country. Reuters reported, citing sources, that the U.S. law firm Dechert is considering closing its only offices in China, in Hong Kong and Beijing, becoming the latest foreign law firm to downsize or terminate its operations in the Greater China region.
In August last year, Dentons, the world’s largest multinational law firm, terminated a merger agreement with the China-based Dentons, which has 8,000 lawyers, citing reasons that included new regulations by Chinese authorities relating to data privacy and cybersecurity.
In recent months, U.S. law firms such as Sidley Austin, Perkins Coie, Latham & Watkins, and Orrick have either closed or announced the closure of their Shanghai offices, while Weil and Akin Gump have closed their offices in Beijing.
On June 26, the globally renowned travel media company and content provider Lonely Planet announced the closure of its China office and the cessation of its publishing business in China due to the impact of the COVID-19 pandemic and strategic adjustments.
According to a report by Nikkei, one year after the enactment of the revised “Counter-Espionage Law,” the Chinese national security apparatus will be granted increased powers starting Monday, July 1, to inspect smartphones and other electronic devices, raising concerns about such inspections upon entry for foreigners.
The new Counter-Espionage Law now extends to encompass any information related to “national security and interests.” The Chinese security department is authorized to inspect luggage and electronic devices on the grounds of suspected espionage. Operational guidelines allow authorities to inspect such phones and personal computers by presenting police or other identification cards.
There is growing concern on social media about foreigners and others facing such checks upon entry into China.