Foreign companies are under growing pressure in China from anti-corruption, security and other investigations as President Xi Jinping’s government tightens control over business, clashing with efforts to lure back investors after the pandemic.
This week, Bain & Co. said police questioned staff in its Shanghai office. It gave no details of what they were looking for. Last month, the corporate due diligence firm Mintz Group said its Beijing office was raided by police who detained five employees. Also last month, an employee of a Japanese drug maker was detained on spying charges and the government announced a security review of memory chip maker Micron Inc.
The actions run counter to efforts by the ruling Communist Party to reignite investor interest in China despite increased political control over the economy. Business groups have said global companies are shifting investment plans to Southeast Asia, India and other economies.
“At a time when China is proactively trying to restore business confidence to attract foreign investment, the actions taken send a very mixed signal,” the European Union Chamber of Commerce in China said Friday in a statement. The investigations come at a time when China’s relations with Washington, Europe and Tokyo are strained by disputes about human rights, Taiwan, security and technology. But there is no indication whether they were politically motivated. Chinese companies have been targeted for more severe action.
Xi, China’s most powerful leader in decades, is in the midst of multiple campaigns to tighten ruling party control over entrepreneurs, root out official corruption and reduce reliance on foreign technology and expertise.
The Beijing office of Deloitte Touche Tohmatsu was fined 211.9 million yuan (USD 30.8 million) in March on charges that it failed to adequately audit state-owned China Huarong Asset Management Co. That came after Huarong’s former boss was sentenced to death in 2021 on charges of taking bribes. The ruling party has tightened legal restrictions on access to information about companies and their employees. That has increased uncertainty for law or consulting firms including Bain & Co and Mintz Group that help clients spot fraud or other misconduct by business partners or acquisition targets.
