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“PUSHING THE BOUNDARIES”
With US-China relations in particular riddled with explosive issues like trade, human rights and Taiwan, Beijing has tightly consolidated its control of sensitive information.
Many experts interpreted state TV coverage of the raids as an unambiguous warning to Chinese citizens about the risks of engaging with firms like Capvision.
Several industry analysts who spoke to AFP said it appeared Capvision, Mintz and Bain had been targeted for individual cases, rather than being a sign of an arbitrary campaign to attack foreign firms.
Capvision, though it has a regional headquarters in New York, is first and foremost a Chinese company.
The CCTV report said one of its sources had leaked information about “the manufacturers and quantities of some important military equipment”.
“I think certain firms … have always engaged in research activities that push the boundaries – and that, as has always been true for decades now, some of them will get caught,” said Bob Guterma, a former Capvision chief compliance officer who now runs news and business intelligence site The China Project.
“People are waking up – or it’s more like the newest round of awakening to the dangers of doing business in China that have always existed.”
Crackdowns on sectors where regulations were previously often lightly enforced – like tech and private tutoring – have been a feature of President Xi Jinping’s time in office.
Beijing-based lawyer Lester Ross, who specialises in regulatory compliance, told AFP that state security forces had been pushing for tighter controls on data-gathering industries for some time.
China’s upper echelons of power are stacked with Xi’s allies after he secured a third term last year.
“It is the change in the balance of forces within the system, among competing bureaucracies, that has triggered the actual raids,” Ross posited.
“CHILLING EFFECT”
The full effect of the amended anti-spying law is still unknown.
Yale’s Daum said the original definition of espionage was so broad, “it isn’t immediately clear what the impact of the expanded definition will be”.
The “open-endedness sometimes makes it difficult to fully assess the risk … (which) inevitably leads to a chilling effect”, he told AFP.
“(Companies) have to be much more cautious about the gathering of information and who they gather the information from, and that will inhibit their ability to actually do business,” said Ross.
“Even publicly available information becomes problematic because some of that is only available in China.”
Access to Chinese data sources, including Shanghai-based Wind Information and academic database CNKI, has recently been tightened for overseas researchers.
The Wall Street Journal reported the move was partly triggered by a series of US think tank reports that made use of similar tools.
The government has also instructed state-owned companies to phase out contracts with the big four accounting firms – Deloitte, KPMG, EY and PwC – according to Bloomberg.
The dissonance between recent events and officials’ attempts to entice foreign capital into China’s COVID-battered economy has increased the sense of anxiety.
“The recent raids and the mixed messages they send have caused a lot of concern, and as that concern flows up into board rooms it is going to be even harder for many firms to approve additional investments” in China, analyst Bill Bishop wrote.
But authorities believe China is too big a market for firms to leave, journalist and author Lingling Wei said.
“They don’t see the contradiction … They still believe they can keep foreign capital from leaving, while at the same time keeping the pressure on the foreign firms.”
