?The recent raid of the Beijing office of Mintz Group, a U.S. corporate investigations firm, and detention of its five Chinese employees has raised concerns among those conducting due diligence in China. We’ve gathered articles on the news from various outlets.
Due Diligence Risks
Mintz Group said in a statement that the authorities closed its operations in Beijing. The company hasn’t been able to contact the employees since they were detained. It initially was unclear what the authorities’ objectives were in investigating the company, and the government at first did not respond to a request for comment. Subsequently, China said the firm was under investigation for “illegal operations” and that the case was under investigation. Mintz didn’t respond to a request for comment on China’s announcement. The detainments highlighted the risks that firms involved in due diligence face in China, as there has been a greater emphasis on tightening the Communist Party’s control of information.
(The New York Times) and (Digital Journal)
Safety of Colleagues of Top Importance
“Our top priority is the safety and well-being of our colleagues in China, where we have retained legal counsel to engage with the authorities and support our people and their families,” the company said in a March 24 statement. “We are ready to work with the Chinese authorities to resolve any misunderstanding that may have led to these events.” The employees were taken away on the afternoon of March 20 and haven’t contacted their families, according to a company executive.
Foreign Companies in China on Alert
The Beijing office, which was closed following the raid, was Mintz’s only one in mainland China. The company specializes in background checking, fact gathering and internal investigations, states the firm’s website.
One U.S. business community person said the incident sent a “remarkable signal” that Beijing wants foreign money and technology but that it won’t accept credible U.S. firms conducting due diligence on Chinese partners or the business environment. “Alerts should be going off in all boardrooms right now about risks in China,” the anonymous source said.
China has said it welcomes foreign trade and investments but that security comes before development.
(Reuters)
Increasingly Pessimistic Business Climate
U.S. businesses operating in China are increasingly pessimistic about their prospects in China, according to a survey by the American Chamber of Commerce in China. Two-thirds of respondents cited rising U.S.-China tensions as the top business challenge.
(BBC News)
Risk Assessment
Even if company officials don’t think changes for the worse are likely in China, it may make sense to prepare for that possibility. Many companies large enough to retain risk consultancies are doing so.
(Lexology)