Big Four firms tell staff to use burner phones in Hong Kong

Consultants at McKinsey, Deloitte and KPMG have been told to not use their primary work phones when visiting Hong Kong, according to a media report. Instead, they have been urged to use ‘burner phones’ when visiting the special administrative region.

Burner phones are secondary, disposable devices that cannot be easily tracked or linked to their user. Using a burner phone instead of one’s primary device can allow for easier evasion of prying eyes.

The revelation, first reported by the Financial Times, comes amidst an increasingly hostile environment for Western firms operating in China and points to a shift in the political climate in Hong Kong away from its previously high level of autonomy from the mainland Chinese government. That autonomy has long made the territory an international business hub, but that might now be changing.

Earlier this year, Beijing appeared to take steps at limiting the influence of Big Four firms operating in the country. The Chinese Ministry of Finance reportedly requested that state-owned enterprises dial back their reliance on foreign consulting firms when seeking financial advisory services.

Consulting giant McKinsey & Company has also reportedly advised staff to take along a separate phone when traveling to Hong Kong. McKinsey, KPMG, and Deloitte all declined to comment on the topic to the Financial Times.

This is not the first time burner phones have been a hot item in China. According to reports, electronics shops saw a surge in demand for burner phones around the time of the government’s frantic Covid-19 contact-tracing efforts, and some athletes in Beijing for last year’s Winter Olympics were also said to be using burner phones.

Mainland China and Hong Kong has been locked in a tense legal and political dispute for decades, with the special administrative region fighting to keep the autonomy it has long enjoyed while Beijing works to bring it under the direct control of the government. Large scale protests against Beijing’s push for direct rule have plagued the city for years and the future of the region is uncertain.

A number of raids by Chinese authorities on the offices of consulting firms, including most recently Capvision’s office in Shanghai, have raised an alarm for Western firms operating in China. There is a fear that the potential legal responsibility for data breaches and espionage are making it more dangerous to do business in China.

Regulations on financial data are notoriously strict in China and a controversial counterespionage law has made processes, which are normally routine for consultants, a lot more challenging. Due diligence within the scope of mergers and acquisitions, for example, includes digging up large amounts of financial data so that buyers can better understand the financial state of a firm they are looking to acquire.

Due diligence processes in particular have raised eyebrows among China’s security apparatus. Part of the reason for that is because most Chinese companies are state-owned, so the government sees their data as especially sensitive.

At the heart of this issue is growing tension between China and Western countries, specifically the US and Europe.

The US antagonized Beijing extensively during President Donald Trump’s presidency, in part by establishing a new set of tariffs in 2018, a move that was seen as highly punitive and often framed as akin to a trade war. Current US President Joe Biden has kept those tariffs in place. A complex set of political, economic, and defense-related issues have long strained relations between the two countries.