China’s Information Game With the West

Commentary Only months after publicly assuaging fears of a crackdown on foreign businesses, Beijing seems to be doing just that. A spate of probes and investigations against foreign businesses in China has renewed questions around China’s policy on foreign companies operating locally. Recently, Chinese authorities questioned the staff of and seized laptops and other documents from the Shanghai offices of U.S. consulting firm Bain & Company. Earlier in March, authorities closed the Beijing offices of Mintz Group and detained its employees. Mintz is an American corporate due-diligence firm. Also in March, Beijing launched an investigation into Micro Technologies on suspicions of “cybersecurity” risks of the products Micro sells in China. The type of firm under Beijing’s current scrutiny is concerning. Both Bain and Mintz, and Micro indirectly, traffic in information. These consulting and advisory firms have a ton of information on Chinese companies, Chinese industries, foreign companies in China, China’s political trends, and across China’s government hierarchy. And they provide such information to U.S. audiences (government and corporate). China’s goal is straightforward. Last October at the CCP Congress, Xi announced that the main focus over the next five years is to become independent from reliance on technology and capital from the West. In short, Beijing made its intentions clear that the United States is not its friend. Recently, China has made its security laws more ambiguous to more easily target foreign corporations and individuals. State media announced in April revisions to the counterespionage law which now scopes in any non-state actors. This means Beijing could label almost any normal interaction a national security offense. For example the ordinary business activities conducted by consulting firms, including gathering information on local industries, potential domestic competitors and business partners, and the relevant regulatory agencies and key political figures, could all be considered espionage. At the same time, parts of the Chinese government are trying to send a message that China is back and open for business. In other words: don’t worry, keep your capital coming. The issue lies in how foreign companies and governments interpret these measures and consider it the ever higher “price to do business” in the Chinese market. Beijing’s bet is that most multinationals cannot afford to lose the ability to produce in and sell to China. Or if they can afford to leave, they are loathe to do so. And multinational corporations are mostly proving China right. In my view, the endgame of this is that the Chinese Communist Party (CCP) turns foreign corporations into a “double agent” of sorts working on behalf of Beijing and the Xi regime. Local Chinese branches of these companies and consulting firms gather and shape the intelligence and information that foreign companies and governments receive, which eventually shape their opinions of what’s occurring “on the ground” and ultimately influence their decision and policy making on China. Wall Street has already been playing such a role between Beijing and the West. China’s former Vice Premier Liu He, one of Xi’s most trusted lieutenants, sought advice from Larry Fink on how to keep Western capital from leaving China during January’s World Economic Forum at Davos, according a Wall Street Journal report. Fink is the powerful and connected CEO of BlackRock, the world’s biggest asset management firm. We’ve discussed in past columns investment banks’ role in facilitating capital movement both into and out of China. In return, the financial services industry has received relatively preferred treatment in the Chinese market, including being granted the ability to wholly own their domestic Chinese subsidiaries. But is this permanent? Only time will tell. Elon Musk has long been a China advocate, and Tesla has maintained a level of success selling in the Chinese market and operating giant battery plants locally. But Tesla’s long-term success is still unknown. Chief local competitor BYD—backed by Warren Buffett—appears on the verge of local and potentially global EV domination. It’s unfortunate to admit that in comparison to Xi’s regime, the Biden administration appears myopic, impotent, and weak. America’s political, economic, and military leadership against China is simply being outclassed. A group of modern day Keystone Kops. Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.