China has targeted another business consultancy for national security reasons and launched an investigation into Shanghai-based Capvision Partners as part of a broader crackdown on the industry, state media reported Monday evening.
Agents raided several of the company’s offices in China, including in Shanghai, Beijing, Suzhou and Shenzhen, state media said, explaining that the company “did not seriously fulfill its responsibilities and obligations” to prevent 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 play a “leading role” in regulating the consulting industry.
The investigation is the latest in a recent government crackdown on consulting and advisory firms, whose clients include foreign investors and foreign companies seeking information on China’s industry. Mintz Group, a US company that specializes in corporate investigations, said in March that Chinese authorities raided its offices, detained five of its Chinese employees and closed the branch. Last month, Bain & Company, a US consulting firm, said security officials had visited its offices and questioned employees.
Police told Jiangsu Television, a state broadcaster, that Capvision had been in regular contact with “secret related personnel” of the Chinese Communist Party and officials in sensitive areas such as defense and science. Authorities accused Capvision of hiring “highly paid” consulting experts to “illegally obtain various kinds of sensitive data,” which they said posed a “major risk and hidden danger to China’s national security.”
A separate report Monday by CCTV, China’s state broadcaster, said the multi-agency investigation resulted in the arrest of at least one state-owned company employee who was sentenced to six years in prison for providing “state secrets and intelligence” to Capvision’s foreign customers.
It’s unclear when the Capvision raids took place and if other firms besides Mintz and Bain were targeted.
Last month, China’s legislature passed a revised counterintelligence law, which broadens the definition of what can be understood as espionage to include sharing “documents, data, materials or objects of importance to 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 stalemate with the United States over restrictions on microchip technology and growing unease about China’s dominance of materials and components used in electric vehicle production.
Founded in 2006 by former Bain consultants and Morgan Stanley investment bankers, Capvision is headquartered in New York and Shanghai, according to the company’s website.
News of the raids on consulting firms last month prompted the US Chamber of Commerce to warn of rising risks when doing business in China.
Gerard DiPippo, a senior fellow at the Center for Strategic and International Studies and a former senior US intelligence officer, said the raids were a “self-defeating strategy” because whatever China gained by restricting sensitive information was “not worth China’s reputational cost.” was.pays with foreign companies.”
Mr DiPippo said multinational companies in China had been trying to determine whether the investigations were motivated by national security concerns or were conducted in retaliation for the Biden administration’s trade restrictions against China.
“While these statements 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 US companies.”
Claire Fu And Olivia Wang contributed research.
