China Warns Of Espionage Threat Through Consulting Firms

Taipei [Taiwan]: China’s Ministry of State Security has issued a fresh warning, underscoring the ongoing threat posed by overseas spy agencies camouflaged within consulting firms, purportedly aimed at acquiring state secrets, Voice of America (VOA) reported.

Through a six-minute video released on the ministry’s official WeChat social media account, a real-life case is depicted where foreign spy agencies allegedly orchestrated a consulting firm to pilfer classified information from a Chinese corporation seeking international investments.

This disclosure coincides with Chinese leader Xi Jinping’s recent meeting with American CEOs, attempting to assuage concerns and affirm China’s commitment to openness for business amidst economic uncertainties and authoritarian signals from the government, according to VOA.

In the past year, foreign investment in China has dwindled, propelled by shifting supply chains and reinforced by China’s implementation of stringent anti-espionage measures, including exit bans and crackdowns on consulting and due diligence firms. Concurrently, the Ministry of State Security has intensified its social media campaigns to alert the public about foreign espionage activities, punctuated by the release of four videos since the inception of its social media account last year.

The latest video, designed with the ambiance of a spy thriller, seeks to convey the modus operandi of espionage activities orchestrated through consulting agencies. It narrates the tale of a Chinese company executive interrogated by a consulting firm representative, delving into sensitive inquiries encompassing the company’s financial details, product specifications, and military applications.

“The seemingly normal investigations conducted by consulting firms are in fact attempts to illegally acquire our commercial secrets and efforts to suppress our advantageous industries,” the ministry wrote, adding that these consulting firms are accomplices to foreign spy agencies aiming to infiltrate key sectors in China.

Although tailored primarily for a Chinese audience, experts speculate that the underlying intention is to instill a sense of vigilance among Chinese citizens, particularly those employed by foreign entities.

Dennis Wilder, a former US national security official, suggests that such campaigns could induce a chilling effect, heightening apprehensions among Chinese nationals, especially those engaged with foreign enterprises.

Over the preceding year, Chinese authorities have conducted raids on several American companies operating within China, detaining numerous Chinese employees. Among the affected entities are renowned firms like Mintz Group, Capvision, and Bain & Company.

While the focus remains on Chinese citizens, Wilder contends that Beijing’s stringent security measures will inevitably cast a shadow over foreign businesses eyeing the Chinese market.

“They have to understand what their counterparts in China are all about, but if they can’t conduct due diligence, they won’t invest in China,” Wilder told VOA in a video interview.
Echoing these sentiments are findings from a 2023 survey conducted by foreign business groups, indicating a growing inclination among foreign companies to divest from China.

Reports reveal declining confidence among American and European companies, with a significant proportion reconsidering China as a primary investment destination due to escalating operational challenges.

Despite the wavering confidence of foreign investors, analysts highlight Beijing’s dual objective of bolstering foreign investor confidence while safeguarding national interests.

“Beijing believes that while they try to attract more foreign businesses to invest in China, they also should ensure key national interests, such as core data or key infrastructure won’t be easily obtained by foreign businesses,” said Hung Chin-fu, a political scientist at National Cheng Kung University in Taiwan.

However, scepticism looms over Beijing’s approach, with foreign businesses expressing apprehensions regarding stringent regulatory frameworks impeding their operations. “At a time when the Chinese government has laid out many red lines in the name of national security, investing in China will be like walking on thin ice for foreign companies,” he told VOA.

Amidst these deliberations, diverging perspectives emerge within China’s leadership echelons regarding the prioritisation of economic growth vis-a-vis national security concerns. While Xi Jinping appears inclined towards prioritising national security imperatives over foreign investments, other leaders, including Premier Li Qiang, may adopt a more nuanced stance, weighing the imperatives of economic growth against security considerations, he told Voice of America.