The Chinese offices of three U.S.-based consulting firms—Capvision, Mintz, and Bain & Company—have been raided by Chinese authorities since the end of last year. All three firms provide data collection and strategic analysis services to international companies. Two Chinese scholars working at Capvision, an “expert network” that connects specialists to companies in need of subject matter expertise, were arrested in May for providing state secrets to Capvision and its foreign clients. Both confessed to their crime on TV and one of them was sentenced to 6 years of prison. These arrests follow an April raid on Bain & Company’s Shanghai office where Chinese police confiscated phones and computers and interrogated staff members, as well as the March detention of five staff members from Mintz’s Beijing office. Chinese authorities have yet to explain why the latter two raids and detainment took place, and some detainees remain missing. Beijing also passed an amendment to anti-espionage laws in April amidst the raids, granting further authority to ban border crossings, broadening the definition of espionage to all materials related to national security and bolstering the state’s ability to access data via anti-espionage investigations.
These raids indicate the worsening political risk environment for American businesses operating in China as Beijing continues to tighten national security restrictions. These unannounced, unexplained law enforcement raids starkly contrast not only China’s recent attempts to set a welcoming tone for foreign capital, but also Beijing’s relative unwillingness to aggressively target major American corporations in the past. As many major American corporations rely heavily on professional services firms like Bain, Mintz, and Capvision to conduct or establish business in China, these raids may also signal that the essential infrastructure allowing foreign businesses to remain profitable in the mainland are now under threat. As trade tensions escalate between the U.S. and China, more of these professional services firms firms–much like the Chinese companies targeted by U.S. export controls or Micron, the U.S. manufacturer facing a ban from Chinese authorities–are likely to end up in the crosshairs of China’s national security apparatus.