Capvision targeted in Chinese crackdown on foreign consultancies

12 May 2023 3 min. read
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Chinese state television on Monday broadcast a raid on Capvision, as the country continues its crackdown on consulting firms.

China Central Television (CCTV) aired footage of police raiding Capvision’s Shanghai offices, questioning employees, and seizing computers. The consultancy was accused of “degenerating into an accomplice of overseas intelligence agencies.”

China’s ministry of foreign affairs on Tuesday said the raid was undertaken to promote “sound development” of the consulting sector and “safeguard China’s security and development interests.”

Capvision was founded in 2006 by former investment bankers and management consultants, including two Wharton graduates who previously worked at Bain & Company. Headquartered in Shanghai and New York, the firm has a global network of more than 450,000 experts providing industry research and advice to hedge funds, corporations, and management consultancies. Of its 700 employees, 500+ are based in mainland China.

The Central Political and Legal Affairs Commission, China’s top legal body, on Tuesday alleged Capvision had accepted consulting projects from companies with close ties to foreign governments, military, and intelligence agencies. The report also claimed Capvision accepted consulting contracts in sensitive fields including national defence and high-tech – areas where the US has imposed trade restrictions in recent months.

Capvision targeted in Chinese crackdown on foreign consultancies

Capvision on Wednesday said it had set up a compliance committee to deal with data security issues and that the investigation was a wakeup call for the industry.

China’s raid on Capvision was the most highly publicized instance of its recent campaign against foreign consultancies. Police in April raided the Shanghai office of strategy firm Bain & Company, seizing phones and laptops. In March, police detained five Chinese nationals working in the Beijing office of Mintz Group, a US consulting firm that provides due diligence services.

China last month approved a new espionage law that broadens the list of activities that are categorized as spying. The country has also clamped down on foreign access to information, including public databases, real-time supply chain data, and academic databases.

The crackdown is at odds with messaging from Li Qiang, the Chinese Communist Party’s second-in-command, who has been trying to lure back foreign investment after tight Covid controls crushed growth in 2022.

Bain offers China staff six-month leave

Following the raid on its Shanghai office, Bain has offered some staff in China the opportunity to take six months of leave while retaining a portion of their salary, the South China Morning Post reported on Thursday.

Under the voluntary “career enrichment programme,” employees would receive 30% of their base pay.

Bain has offered a similar arrangement in its US operations to retain MBA grads while the consulting industry faces a slump in demand. The firm has told MBA grads with offer letters it will pay them $40,000 to work for a non-profit or $30,000 to learn a new language if they push their start dates to April 2024.