China Launches Investigation of Capvision Offices

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Facts

  • Chinese authorities have launched an investigation into the Shanghai and New York-headquartered consulting firm Capvision, Chinese media reported Monday. This comes as Beijing tightens its scrutiny of foreign consulting and advisory firms.1
  • Capvision offices in Shanghai, Beijing, Suzhou, and Shenzhen were raided for failing to seriously perform their "responsibilities and obligations" to prevent espionage, state media claimed.2
  • The investigators allege that Capvision took on consulting projects from foreign companies in industries sensitive to China. Some of its clients, they add, were suspected of having close ties to foreign governments, militaries, and intelligence agencies.3
  • However, Capvision said it was committed to its national security responsibilities and was taking a "leading role" in ensuring the consulting industry's compliance.4
  • The Capvision probe comes after Chinese investigators recently questioned employees at the Shanghai branch of US consulting firm Bain & Company and raided and detained employees at the Beijing office of US due diligence firm Mintz Group.5
  • In April, Beijing passed an updated anti-spying law, effective July 1, that significantly expands the definition of acts considered espionage and reportedly could increase PRC authorities' scrutiny of foreigners doing business in China.6

Sources: 1Al Jazeera, 2New York Times, 3CNBC, 4BBC News, 5FT, and 6Nikkei Asia.

Narratives

  • Pro-China narrative, as provided by Global Times. The Capvision investigation and the recent revision of China's anti-espionage law are further evidence that China is serious about combating increasing espionage activity and protecting national security. Moreover, the revised legislation protects the interests of foreign companies and individuals, which means that contrary to tiresome and mushrooming criticism, the anti-espionage law will continue to improve rather than worsen the PRC's business environment.
  • Anti-China narrative, as provided by Business Insider. The Capvision raids are yet more bad news for all companies who hoped that China's economy would finally reopen to the world after COVID. Moreover, with its ambiguous definition of China's "national security," the new espionage law is likely to further weigh on the business climate, which is a cause of great concern for investors and their local business partners. China risks scaring away foreign investors, thereby jeopardizing its economic performance.

Predictions