US Chamber of Commerce Warns of Heightened Risk for Firms Doing Business in China

The United States Chamber of Commerce has sounded the alarm about a dramatic increase in the hazards and uncertainties associated with conducting business in China due to the regime’s “increased official scrutiny” of U.S. corporations there. The influential business group said that it was “closely monitoring” the situation and noted that industries subject to “heightened official scrutiny” include professional services and due diligence firms. The organization further stressed in an April 28 statement that the services these firms provide are fundamental to establishing investor confidence in any market, including China. The warning came just a few days after the communist regime passed its newly revised anti-espionage law, which will take effect on July 1. The revision has expanded the definition of espionage, making it broader and vaguer, which increased the range of information and resources the nation considers relevant to national security, the chamber added. The U.S. group called the growing scrutiny as a result of the legislative change “a matter of serious concern for the investor community and likely is as well for their local business partners in China.” According to the lobby group, despite senior Chinese officials’ stated commitment to greater openness and attracting foreign investment, “foreign investment will not feel welcomed in an environment where risk can’t be properly assessed and legal uncertainties are on the rise.” Probes of Foreign Businesses The business environment in China has worsened following a spate of probes and investigations against foreign businesses. Last week, Chinese authorities interrogated staff at the Shanghai offices of American consultancy firm Bain & Company, and seized laptops and other papers. The purpose of the surprise raid on April 26 is unclear, as is the status of the employees who were questioned and their nationalities. The incident followed a March raid on the Beijing offices of the Mintz Group, a due diligence firm. Five Mintz employees were reportedly detained on suspicion of engaging in illegal business operations, and the regime confirmed those charges. Although the detained workers are Chinese nationals, Mintz is headquartered in New York. According to a Wall Street Journal report, a Mintz executive said that the company had no idea who was detaining its employees or when they might be released, nor why the raid was carried out. Due to the arrests, Mintz closed its sole office in China’s mainland. The company’s closure is a setback for China’s global business community, which depends on it for trusted international corporate investigations as part of hiring, transactions, and litigation in China. Also in March, Beijing said it would begin reviewing products sold by U.S. chip maker Micron Technologies due to concerns about “cybersecurity” threats. Deloitte Touche Tohmatsu, the Beijing office of Deloitte, one of the world’s Big Four accounting firms, was fined RMB 211.9 million (about $30.8 million) and suspended for three months for failing to adequately audit China Huarong Asset Management, China’s Ministry of Finance announced on March 17. Meanwhile, China’s Ministry of Finance accused Huarong and its investment arms of internal governance lapses, failing risk controls, and seriously distorting accounting information from 2014 to 2019. Huarong is central to China’s financial system, one of four institutions created by the Chinese Communist Party (CCP) in the late 1990s to solve the problem of bad loans at state-owned banks. It then built an empire by lending to high-risk companies, using access to cheap loans from state-owned banks. Foreign Companies Should Be ‘Very Worried’ Mr. Huang, an executive of a foreign company in Hong Kong, told The Epoch Times on April 27 that the revision of the CCP’s anti-espionage law may have the greatest impact on companies and employees involved in three types of businesses. “The first type is those whose business in China involves investigation, or those who have accounting capital review business, such as Deloitte and four other major accounting firms. They may have some sensitive information. “The second is the investment analysis report companies,” he said. “The third type is enterprises that have cooperation or economic and trade exchanges in medical biotechnology and software in China.” Huang said China’s national security laws are not comparable with the national security and anti-terrorism laws of most Western countries, and the Chinese communist legal system is incompatible with common international laws. “Because the CCP’s legal operations often violate human rights, foreign companies and their employees will be very worried,” he warned. Alex Wu, Jenny Li, Angela Bright, and Reuters contributed to this report.