Global corporates rethinking China operations: Report

    The Hawk
    May17/ 2023

    Global corporates

    Beijing: Recently, China has been targeting prominent consulting firms with foreign ties through raids, detainments and arrests which has raised alarm among global corporates about doing business in China, The New York Times reported.
    Recently, there were reports of raids or official security visits at prominent consulting firms in the last few months, including American outfits such as the Mintz Group and Bain and Company and most recently Capvision Partners, a consulting company with headquarters in New York and Shanghai, which have raised alarm.
    Such firms help foreign businesses assess investments before they sink money into a company. They play a particularly crucial role in China, where reliable information is hard to secure and can come at a premium. Capvision disclosed in a regulatory filing two years ago that most of its expert researchers were paid about USD 200 per hour, with some making as much as USD 10,000 an hour.
    Earlier, in March, China's commerce minister, Wang Wentao said that foreign businesses "are not foreigners, but family and then the crackdown came on firms with foreign ties, reported The New York Times.
    Wang pledged to remove obstacles preventing firms from investing more, 2023, he declared, was "Invest in China year."

    Over the last few years, China has been growing as a less business-friendly country. Some companies and investors were already starting to consider, for the first time in decades, whether the risks of investing in the country might outweigh the potential benefits.
    The supply chain disruptions wrought by "zero-Covid" awakened companies to the downside of reliance on China. The geopolitical standoff between Washington and Beijing elevated the risk, forcing many multinationals to draft contingency plans for an alternative to China and to find ways to "decouple."
    The recent targeting of consulting and advisory firms with foreign ties through raids, detainments and arrests has reignited concerns about doing business in China. Executives, whether at midsize manufacturers or large corporations, are exploring how to reduce the threats to their businesses and protect their employees, according to The New York Times.
    And as Xi Jinping, China's top leader, demands that Beijing bolster its national security and limit information to foreign governments and companies, some businesses are taking action.
    Dan Harris, a Seattle lawyer who works with foreign companies in China, said he has heard from an unusually large number of businesses in recent weeks looking for ways to reduce their presence in China without leaving the market altogether.
    One of his clients, a US furniture manufacturer, is working on a deal to distribute its products through a Chinese firm so it can remove its American employees from the country. A U.S. education company, also a client, is shutting its China units and licensing its technology to its current Chinese employees. He declined to offer more detail because he advises clients not to discuss leaving China until they are gone, as per the report in The New York Times. (ANI)

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