Chinese police question Bain's employees in Shanghai

Chinese police visited the Shanghai offices of Bain & Company to question its employees, as Chinese scrutiny of US firms continues to rise.

Chinese police made a surprise visit to the Bain office three weeks ago, people familiar with the situation told the Financial Times. The officers seized computers and smartphones but did not detain any employees.

It isn’t clear why Chinese authorities targeted Bain, which employs more than 200 people in the country. The Boston-based management consultancy advises Chinese companies ranging from tech giant Alibaba to startup electric vehicle firm Li-Auto.

“We can confirm that the Chinese authorities have questioned staff in our Shanghai office. We are co-operating as appropriate with the Chinese authorities,” Bain told the Financial Times. “At this time, we have no further comment.”

The Bain visit is the latest instance in a growing crackdown on foreign consultancies in China. Approximately one month ago, police detained five Chinese nationals working in the Beijing office of Mintz Group, a US consulting firm that provides due diligence services – including for manufacturing investments. China’s foreign ministry said the company is accused of engaging in unlawful business operations.

Deloitte in March received a record fine of $31 million from Chinese regulators for alleged negligence in past audits. The Big Four accountancy also had its operations suspended for three months.

The actions have raised concerns at US companies that China is retaliating for measures taken by the Biden administration. The president has imposed restrictions on the sale of critical semiconductor-making equipment to China as the country attempts to make up ground on chipmaking.

Computers chips and Taiwan are focal points in US-China tensions. Taiwan is the global center of chipmaking, which is vital to everything from smartphones to consumer automobiles and advanced weapons systems. Taiwan is also an independent country that China denies is a state, and in turn would like to conquer – perhaps despite the disastrous political and economic ramifications. The analogue is Russia’s treatment of Ukraine, though Russia’s military foundering and the credible threats of a US response may give the Chinese Communist Party pause in launching a significantly more difficult amphibious invasion of a fortified island.

The US is looking to choke off the ability to develop computer chips that could be used in advanced military applications by a sabre-rattling adversary, as well as deny forwarding of such components to Russia.

In a tit-for-tat, China is responding with hostility to foreign companies and investors. The country last week approved a new espionage law that broadens the list of activities that are categorized as spying – potentially exposing more employees of foreign firms to trumped up charges of espionage.

China has also banned executives from defense firms Raytheon and Lockheed Martin from entering the country, as well as prohibited Chinese companies from selling to the two firms.