China raids offices of business consultancy Capvision

May 9, 2023

BEIJING (AP) — China’s chief foreign intelligence agency has raided the offices of business consulting firm Capvision in Beijing and other Chinese cities as part of an ongoing crackdown on foreign businesses that provide sensitive economic data.

Foreign companies operating in China have come under increasing pressure, driven primarily by national security considerations, as Xi Jinping’s government tightens control over business, clashing with efforts to lure back foreign investors after COVID-19 pandemic restrictions were lifted.

Investigators simultaneously visited Capvision branches in Beijing, Shanghai, and the southeastern manufacturing hubs of Suzhou and Shenzhen, along with other locations the state media reports did not identify.

Officers from the Ministry of State Security, police and market regulatory bodies questioned staff, the reports said. There was no word on arrests or detentions, although the reports said investigations had been opened into the company and “personnel involved in the case according to law.”

No details were given about the specific legal issues at stake, and state media did not give the exact dates of the raids on Capvision, which is headquartered in New York and Shanghai.

“Over recent years, in order to realize the strategy of containing and and suppressing China, certain Western countries have become increasingly rampant in stealing intelligence and information pertaining to our country’s military industry, economy and finance,” state broadcaster CCTV said Monday.

The report alleged domestic consulting companies were tools of stealing such secrets. “Some domestic consulting companies have weak awareness of national security and seek to benefit financially by straddling the legal barriers,” the CCTV report said.

Asked about the recent actions against Capvision and other companies, Foreign Ministry spokesperson Wang Wenbin said China’s national security authorities and other “competent departments” have recently been carrying out “open law enforcement on relevant enterprises in accordance with the law.”

“This is a normal law enforcement action in accordance with Chinese law, aiming to promote the regulated and sound development of the industry and safeguard national security and development interests,” Wang told reporters at a daily briefing Tuesday. The spokesperson gave no further details.

Capvision bills itself on its website as a “leading global expert network platform that excels at identifying the right advisors for specific business insights.” The company says it serves more than 2,000 clients through more than 600 researchers and 450,000 industry professionals.

China needs to be more transparent about law enforcement actions against companies such as Capvision that carry out the sort of due diligence that firms need to make investment decisions, said Eric Zheng, president of the American Chamber of Commerce in Shanghai said in a press statement.

“It would be helpful if the authorities would more clearly delineate the areas in which companies can or cannot conduct such due diligence,” Zheng said. “This would give foreign companies more confidence and enable them to comply with Chinese regulations.”

Capvision has not commented on the raids, but on its WeChat social media channel posted a flyer Monday marking National Security Education Day, which fell on April 15.

“As a leading Chinese industry specializing in providing information services, Capvision is resolutely committed to the outlook on national security and is leading the industry in its healthy and orderly development,” the flyer said.

The company is just the latest to be investigated, apparently over its attempts to obtain information that would not be considered state secrets in other countries.

Last month, consulting firm Bain & Co. said police questioned staff in its Shanghai office. It gave no details of what they were seeking. Prior to that, the corporate due diligence firm Mintz Group said its Beijing office was raided by police who detained five employees. An employee of a Japanese drug maker has also been detained on spying charges, and the government announced a security review of memory chip maker Micron Inc.

Last week, U.S. Ambassador Nicholas Burns said American companies were deeply concerned about a recent expansion of China’s anti-espionage law that could put them at legal risk simply for seeking standard information on China’s economy and local businesses they might seek to partner with.

Burns said the mixed signals were prompting many to put major investments on hold until more clarity was available, although they were unlikely to pull out of the world’s second-largest economy, which, despite the vitality of the private sector, is still dominated by major state-run companies and financial institutions.

Still, some global companies are shifting investment plans to Southeast Asia, India and other economies where political risks are considered lower.

Whether politically motivated or not, the investigations come as China’s relations with Washington, Europe and Tokyo are strained by disputes about human rights, Taiwan, security and technology.

Xi, China’s most powerful leader in decades, is in the midst of multiple campaigns to tighten the ruling Communist Party’s control over entrepreneurs, root out official corruption and reduce reliance on foreign technology and expertise. Foreign firms already face hurdles in executive travel to China, along with the possibility of exit bans, theft of commercial secrets and Chinese government interference in deal-making.

Changes to the espionage law give authorities powers to gain access to electronic information. The law covers all “documents, data, materials and items related to national security,” according to the official Xinhua News Agency. It remains unclear how national security is defined.

Foreign companies and government agencies have for years advised employees visiting China not to carry computers or mobile phones with confidential information because they might be seized by authorities or stolen by industrial spies.

The crackdowns paint a jarring backdrop for official efforts to reverse a decline in foreign business interest in China. The ruling party wants foreign companies in electric cars and other fields to bring in technology and provide competition to force Chinese companies to improve.