China’s consultancy crackdown is scaring away foreign investors, experts warn
- Investigations into global advisories such as Capvision Partners have ‘sent a warning signal’ to the whole industry, one consultancy CEO says
- The disappearance of these consultancy services, along with rising US-China tension, will deter foreign investments, a venture capitalist says
China’s investigation into an international consulting company on national security grounds, reported by the country’s largest state broadcaster, has set off alarm bells across the business advisory industry, in a development that is set to frighten away potential investors, according to industry insiders.
Consultancies and due diligence advisories in China, both local and foreign ones, have long served as the eyes and ears of clients mulling investments in the country, and it has become an industry routine for these companies to share their knowledge, views and expertise as part of their services.
While some of these firms have operated in grey areas, including accepting hefty payments in exchange for providing insider information, Chinese authorities had largely tolerated their existence as they were necessary to attract investments.
According to the China Central Television (CCTV) report, national security authorities raided the Shanghai, Beijing, Suzhou and Shenzhen offices of Capvision, which runs China’s largest expert network group and has offices across the globe including Hong Kong and New York.
