Capvision completes government-supervised rectification in China

04 October 2023 3 min. read

International advisory firm Capvision has completed an inspection conducted by the Chinese government into its offices in Mainland China and announced that it has created a “comprehensive and systemic compliance approach” that will plug what the company says were “loopholes” in its system.

Over the past several months, both the firm and Chinese government authorities worked together to address national security issues, highlighting their joint commitment to ensuring a secure and compliant environment in the interest of the Chinese government. But that has worried foreign business leaders working in China.

In May of this year, Chinese police conducted raids at multiple offices of Capvision, with the investigation into the firm prominently featured on state-run television China Central. The allegations stated that Capvision’s activities were in violation of national-security regulations.

Capvision completes government-supervised rectification in China

In the same time period, internal investigators in China also reported certain consultants allegedly collaborating with Western entities in activities related to espionage, acquisition, and manipulation of state secrets and intelligence.

As a consequence of the Chinese government’s scrutiny, Capvision announced that it had implemented a comprehensive overhaul of its internal operating systems to align with China’s national-security laws.

Capvision is not exactly a traditional consulting firm; rather, it is considered an ‘expert network’, which works by connecting companies with experts that can provide required insights or advisory services. It was established in Shanghai in 2006 by former Bain & Company consultants and Morgan Stanley investment bankers. Despite a heavy presence in China, it is headquartered in New York.

State-run CCTV revealed that Capvision, with over 1,000 experts in defense and military sectors, accepted consulting projects from foreign entities closely associated with governments, militaries, and intelligence agencies, a prospect that the Chinese government saw as threatening. Chinese police said the firm received millions of dollars from overseas companies.

Posted through the Chinese social media platform WeChat, Capvision expressed in a statement that “the firm has undertaken a rigorous introspection, addressed vulnerabilities, and put in place a more comprehensive and systematic compliance system, along with an implementation plan.”

China's recent regulatory actions, including the crackdown on Capvision, have left foreign businesses in the country cautious. Executives have been barred from leaving the mainland and firms like Mintz and Bain & Company have faced scrutiny, questioning, or even raids.

The crackdown extends to accounting and consulting giants, with Deloitte receiving a substantial fine and a three-month ban on operating in Beijing. State-owned enterprises have been advised to cease using Deloitte, PwC, EY, and KPMG due to data security concerns earlier this year.

Increased scrutiny of businesses in China, as noted by economists, could have a negative impact on the nation's ability to continue attracting foreign investments. On the other hand, consulting firms have served as essential resources for international businesses seeking valuable insights into China, thanks to their services in providing investors and companies with a distinctive informational advantage.