Capvision probe 'isolated case' rather than consulting clampdown; no need for foreign firms to worry: observers
Published: May 10, 2023 11:48 PM
Photo: Screenshot of the report for Capvision from China Media Group

Photo: Screenshot of the report for Capvision from China Media Group

Chinese authorities' probe of leading consulting company Capvision is an isolated one for the purpose of safeguarding national security rather than an industry crackdown as some foreign media have hyped. Foreign firms, as well as others in the industry, don't have to worry as long as they abide by laws and rules, industry observers told the Global Times on Wednesday. 

Chinese authorities, including national security and other departments, launched a law enforcement action against Capvision, as the company is believed to have "induced domestic experts in key fields," including the military industry and high technology, to offer intelligence and thereby played into the hands of overseas forces, according to a report from China Media Group on Monday.

Neverthless, some foreign media and chambers are hyping that China is conducting an industry-wide clampdown, and cautioning foreign businesses that are operating in the country, although officials reiterated that the move aims to "promote the healthy development of the industry" and that the nation's welcome to foreign businesses has not changed.

The industry as a whole is reviewing businesses and risks to avoid touching on the "red line," an industry player who asked to remain anonymous told the Global Times on Wednesday, but noting that for other non-sensitive consultancy requests, things are going on as usual. 

"We believe this is a 'random case,' and I also see no impact on foreign firms in particular as long as they are abiding by Chinese laws, and the environment has not changed as well," said the above-quoted insider.

Founded in 2006 by former management consultants and investment bankers, Capvision is "one of the largest and fastest-growing global expert network platforms, headquartered in New York City and Shanghai," according to the company's website.

In order to actively implement the relevant rectification requirements of the national security organs, Capvision has established a compliance management committee, the company said late on Wednesday.

"We deeply recognize that in our past business activities, Capvision has not fully fulfilled its national security prevention responsibilities, and there are significant hidden dangers and loopholes, which have caused serious harm to national security," said the firm.

"The probe took place late last year, and the business of Capvision was partly impacted afterward. Some state-owned clients are avoiding its services, and some experts who worked in the military, semiconductor or other sensitive areas quit to prevent potential risks," a former client of Capvision told the Global Times on Wednesday.

The client, who asked to remain anonymous, said the consulting company was once very "widely used," with clients ranging from top state-owned financial institutions to leading internet giants for its "rich source of experts in a wider range of areas than its counterparts."

According to its prospectus, the company's top five clients are Chinese financial institutions, which account for about one-quarter of revenue. At the end of September 2021, it said it had helped 16 of the world's top consulting firms, and 90 percent of the most active private equity and venture capital firms in China. 

The company once aimed to get listed on the A-share and Hong Kong stock markets, but its attempt failed.

In response to the case, Chinese Foreign Ministry spokesperson Wang Wenbin said at Tuesday's press briefing that Chinese national security authorities' probe into a consulting company was a normal law enforcement action in line with laws, which aims to promote the healthy development of the industry and safeguard national security and development interests.

Industry players told the Global Times that they expect a more regulated environment for the industry under a revised Counter-Espionage Law, which will take effect on July 1, calling for a more "regulated and healthy" development of the industry.

Capvision said in a statement posted to its WeChat account on Monday evening that it would uphold national security policies and play a leading role in the healthy development of the consulting industry.