China has kicked off an anti-spy campaign, targeting violations at consulting firms and named one of them for facilitating the leak of state secrets, state-run media reported.
(Bloomberg) — China has kicked off an anti-spy campaign, targeting violations at consulting firms and named one of them for facilitating the leak of state secrets, state-run media reported.
A provincial TV channel in Jiangsu — an economic powerhouse neighboring Shanghai — reported the start of a country-wide campaign against national security violations among consulting firms.
The state security agency in Suzhou, a key city in the province, visited the local branch of Capvision, a consulting firm with headquarters in New York and Shanghai. Capvision employees were questioned and some items were searched and seized, according to the report.
By the order of China’s central government, law-enforcement operations were synchronously carried out in other cities, including Beijing, Shanghai and Shenzhen. Capvision has offices in those cities, and the report didn’t identify whether other firms were involved.
Some companies have illegally acquired sensitive data through frequent contact with people working in government agencies and the defense sector who have access to state secrets, the TV report said, citing an unidentified police officer. That’s created major risks to national security, the station reported.
Gray Area
Other firms that have been hit recently include US consultancy Bain & Company, which confirmed that Chinese authorities questioned its staff, and New York-based due-diligence enterprise Mintz Group. Japanese drugmaker Astellas Pharma Inc. saw the detention of an employee.
“Foreign companies need to assess whether the work they’re doing in China might be viewed as supporting a hostile agenda,” said Gabriel Wildau, managing director at advisory firm Teneo Holdings LLC in New York. “Information that on its face doesn’t appear sensitive or relevant to national security might be viewed as such if it’s used in the context of providing advice in service of an anti-China or pro-decoupling agenda.”
It’s not clear where the red lines are, so any work that sits in a gray area should probably be performed outside China, Wildau added. “My sense from the recent incidents is that Chinese staff and long-term expatriates are at greater risk than visiting executives,” he also said.
State broadcaster CCTV separatelly reported that some consulting firms, including Capvision, had ignored national security risks and deliberately “selected, lured and hoaxed experts and scholars in sensitive industries to provide internal information” involving secrets.
‘Foreign’ Agencies
By doing so, companies ended up becoming accomplices in spying on “state secrets and intelligence for foreign intelligence agencies,” the CCTV report said.
Capvision said in a statement posted to its WeChat account on Monday evening that it will resolutely stick to national-security policies and take the lead to guide the healthy development of the consulting industry.
Read More: Foreign Executives in China Ask ‘Who’s Next?’ After Bain Probe
Growing concerns in the business community about operations in China contrast with public messages of assurance from Beijing about the nation being open. Premier Li Qiang called China “an anchor for world peace and development” in a March speech aimed at wooing the global business community.
The government last month passed a new counter-espionage law that expanded the list of activities that could be considered spying — intensifying the risks for foreign firms. And Beijing has also moved to tighten its grip on sensitive data as tensions with Washington mount.
Read more: China Broadens What It Considers Spying in a New Espionage Law
Founded in 2006 by former management consultants and investment bankers, Capvision describes itself as one of the largest and fastest-growing global “expert network platforms.”
In February 2022, Capvision Partners (Shanghai) Corp. filed for an IPO in Hong Kong, but the status had shown as “lapsed” before China’s probe.
–With assistance from Li Liu and Jacob Gu.
(Updates story with probe details, analyst comment, and background on Capvision, starting in third paragraph.)
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