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China has targeted another global business consulting firm on national security grounds, launching an investigation of the Shanghai-based Capvision Partners as part of a broader crackdown on the industry, state media reported on Monday night.
Officers raided several of the firm’s offices in China, including in Shanghai, Beijing, Suzhou and Shenzhen, state media said, explaining that the company was not “earnestly fulfilling the responsibilities and obligations” of preventing espionage.
Capvision did not immediately respond to a request for comment.
On Monday night, the company said on its official account on WeChat, a Chinese social media and chat app, that it would “firmly implement national security development” and take a “leading role” in regulating the consultancy industry.
The investigation is the latest in a recent government crackdown on consulting and advisory firms, whose clients include overseas investors and foreign companies seeking information into Chinese industry. Mintz Group, an American company that specializes in corporate investigations, said in March that Chinese authorities had raided its offices, detained five of its Chinese staff and closed the branch. Last month, Bain & Company, a U.S. consulting firm, said security officials had visited its offices and questioned employees.
The police told Jiangsu Television, a state broadcaster, that Capvision had frequently contacted “secret-related personnel” in the Chinese Communist Party as well as officials in sensitive fields such as defense and science. The authorities accused Capvision of hiring consulting experts “with high remuneration” to “illegally obtain various types of sensitive data,” which they said posed a “major risk and hidden peril to China’s national security.”
A separate report Monday by CCTV, the Chinese state broadcaster, said the multiagency probe resulted in the arrest of at least one employee of a state-owned company who was sentenced to six years in prison for providing “state secrets and intelligence” to Capvision’s foreign clients.
It’s unclear when the raids on Capvision took place or if other firms have been targeted besides Mintz and Bain.
Last month, China’s legislature passed a revised counterespionage law, broadening the definition of what may be construed as spying including sharing “documents, data, materials or objects bearing on national security and interests.”
It signals Beijing’s renewed efforts to limit the flow of what it considers sensitive information to foreign investors and governments. China is locked in a standoff with the United States over restrictions on microchip technology and growing unease about Chinese dominance of materials and components used in the production of electric vehicles.
Capvision was founded in 2006 by former Bain consultants and Morgan Stanley investment bankers and is headquartered in New York and Shanghai, according to the company’s website.
News of the raids on consulting firms last month prompted the U.S. Chamber of Commerce to warn of rising risks in doing business in China.
Gerard DiPippo, a senior fellow at the Center for Strategic and International Studies and a former senior U.S. intelligence officer, said the raids were a “a self-defeating strategy” because whatever China gained by restricting sensitive information was “not worth the reputational costs China is paying with foreign businesses.”
Mr. DiPippo said multinational companies in China had been trying to determine if the investigations were driven by national security concerns or were conducted as retaliation for the Biden administration’s trade restrictions on China.
“While these explanations are not mutually exclusive, the Capvision case adds more weight to the national security argument,” Mr. DiPippo said. “In that case, the actions may not be arbitrary, but they will have a chilling effect, especially with investors and local staff employed by U.S. firms.”
Claire Fu and Olivia Wang contributed research.
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