Chinese
authorities
have
carried
out
an
investigation
into
consulting
firm
Capvision
Partners,
state
media
CCTV
reported
on
May
8.
CCTV
said
that
investigations
by
Chinese
national
security
authorities
had
found
that
overseas
institutions
have
used
domestic
consulting
firms
to
steal
state
secrets
and
intelligence
on
areas
key
to
China.

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|
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Images
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|
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Images

China
wants
foreign
investment,
but
it
wants
them
on
its
own
terms.

However,
Beijing’s
terms
aren’t
clear
for
now

and
it’s
raised
concerns
and
triggered
second
guessing
in
the
global
business
community.

Last
Monday,
state
broadcaster
CCTV

singled
out

a
consulting
company
for

not
complying
with

China’s
national
security
laws.

Shanghai-based
Capvision
Partners
was
just
the
latest
company
recently
subjected
to
such
investigations
in
the
mainland.
In
March,
U.S.
due
diligence
firm

Mintz
told
Reuters

police
raided
its
Beijing
office,
and
detained
some
of
its
Chinese
staff.
In
April,
U.S.
management
consultancy
Bain
&
Co

reportedly
confirmed

police
visited
its
Shanghai
office.

These
firms
provide
due
diligence
services,
which
companies
and
investors
routinely
employ
to
determine
whether
suppliers
are
complying
with
rules
and
regulations

not
just
in
China,
but
in
other
jurisdictions
as
well.
They
also
audit
supply
chains,
among
many
other
services.

At
a
time
when
China
is
actively
encouraging
foreign
investment
into
the
world’s
second-largest
economy
that
has
been
deeply
hurt
by
the
country’s
long-held
zero-Covid
policy,
such
an
escalation
in
China’s
concerns
about
data
is
hurting
sentiment
and
seems
at
odds
with
its
overt
claims
of
openness.

“It
may
seem
a
paradox,”
said
Chong
Ja
Ian,
an
associate
professor
at
the
National
University
of
Singapore
who
studies
Chinese
foreign
policy.
“But
this
is
consistent
with
what
we
have
seen
of
the
current
China
leadership:
they
want
more
control
over
all
facets
of
society.”

“This
is
a
government
that
built
its
legitimacy
on
performance,
so
they
would
be
anxious
to
maintain
a
perception
of
control
when
the
country
is
facing
more
pressures
from
different
directions
now,”
he
told
CNBC.


So
much
of
what
is
now
regarded
as
national
security
or
state
secrets
is
not
sufficiently
defined
or
classified.

Lester
Ross

lawyer

“This
is
a
government
that
built
its
legitimacy
on
performance,
so
they
would
be
anxious
to
maintain
a
perception
of
control
when
the
country
is
facing
more
pressures
from
different
directions
now,
including
demands
for
more
access
to
information,”
Chong
added.

At
a
regular

press
conference
helmed
by
China’s
Foreign
Ministry

a
week
ago,
Beijing
appeared
keen
to
downplay
the
Capvision
probe
as
an
isolated
incident.

“These
are
normal
law
enforcement
actions
consistent
with
Chinese
laws
that
aim
to
promote
sound
and
well-regulated
growth
of
relevant
sector
and
safeguard
national
security
and
development
interests,”
said
ministry
spokesperson
Wang
Wenbin.


‘Arbitrary’
enforcement

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more
about
China
from
CNBC
Pro

“The
enforcement
actions
seem
very
arbitrary
now,”
Lester
Ross,
a
foreign
lawyer
in
China,
told
CNBC.
“To
have
multiple
companies
involved
now
in
this
crackdown
and
the
restriction
of
financial
data
to
foreigners,
it
appears
that
Chinese
security
departments
are
on
to
something
larger.”

“A
major
question
about
Chinese
law
generally
is
the
need
for
greater
precision
in
delineating
what’s
permissible
and
what’s
not:
so
much
of
what
is
now
regarded
as
national
security
or
state
secrets
is
not
sufficiently
defined
or
classified,”
Ross
added.


Leaked
state
secrets?

The
accusations
against
Capvision
included
claims
the
consultancy
was
among
those
used
by
foreign
institutions
with
“complex
backgrounds”
as
a
pretext
to
steal
state
secrets
and
intelligence
in
key
sectors
while
evading
the
law.
Chinese
authorities
alleged
that
Capvision
accepted
more
than
2,000
remittances
from
hundreds
of
overseas
companies
totaling
$70
million
between
2017
and
2020,
according
to
a
CNBC
translation.

State-owned
CCTV
claimed
that
Capvision
tapped
on
a
vast
“network
of
experts”
of
about
300,000
people
in
areas
ranging
from
domestic
policy
research,
national
defense
and
military
technology
to
banking,
finance
and
medicine.

The
CCTV
program
also
claimed
to
feature
one
of
Capvision’s
experts
who
was
convicted
of
disclosing
information
relating
to
the
number
of
unnamed
military
aircraft
on
the
inventory
of
a
particular
institution
or
company,
according
to
a
CNBC
translation.

A
building
official
stands
outside
the
Capvision
office
in
Beijing
on
May
10,
2023.
China
said
on
May
9
a
raid
by
authorities
on
US
consultancy
Capvision’s
offices
in
the
country
was
aimed
at
safeguarding
its
“national
security
and
development
interests”.

Greg
Baker
|
Afp
|
Getty
Images

In
a
sign
that
last
week’s
state
media
report
has
triggered
plenty
of
reassessment
in
the
business
community,
the
state-owned
Securities
Times

reported

last
Thursday
that
Chinese
regulators
have
instructed
mainland
Chinese
brokerages
securities
firms
to
strengthen
compliance
over
sensitive
information,
expert
invitation
and
interviews.

The
American
and
European
chambers
of
commerce
in
China
also
expressed
concern.

The
recent
investigations
“risk
heightening
uncertainty
at
a
time
when
European
companies
are
looking
for
clear
signs
that
China’s
business
environment
is
becoming
more
reliable
and
predictable,”
the
European
Chamber
of
Commerce
in
China
said
in
a
statement.
“The
European
Chamber
respects
the
rule
of
law
and
expects
it
to
be
followed
in
these
cases.”

Last
Wednesday,
Capvision
pledged
to
“actively
address”
demands
by
Chinese
authorities
about
the
company’s
negligence
of
its
national
security
responsibilities,
having
formed
a
three-person
internal
“compliance
committee”
chaired
by
its
chief
executive
Xu
Rujie.

“We
are
deeply
aware
we
have
failed
to
fully
comply
with
national
security
responsibilities
in
our
past
business
activities
and
there
are
major
hidden
dangers
and
loopholes
that
have
led
to
serious
danger
to
the
country’s
national
security,”
the
Shanghai-based
company
said
in
a
statement,
according
to
a
CNBC
translation.

Without
more
details
on
what
is
permissible
could
make
it
more
difficult
for
prospective
investors
to
do
their
due
diligence
before
committing
to
deals,
particularly
given
the
nature
of
doing
business
in
China.

“In
a
state-driven
economy
like
China’s,
a
lot
of
local
Chinese
companies
would
have
dealings
with
the
government
at
various
levels,”
said
Chong
from
NUS.
“So
some
commercial
data
would
inevitably
have
political
and
national
security
implications.”

“I
am
not
sure
if
the
Chinese
government
is
interested
in
being
more
precise
about
what
it
means,”
the
professor
added.
“After
all,
ambiguity
and
lack
of
clarity
is
a
tool
commonly
used
by
authoritarian
governments
to
retain
and
enhance
its
control.”