HONG KONG/SHANGHAI, May 19 (Reuters) – Some Hong Kong-based staff with U.S. consultancy Mintz Group have left the city after the firm’s Beijing office was raided by Chinese police in March, according to two sources with direct knowledge of the matter.
Chinese authorities̵[ads1]7; investigations into Mintz, as well as US management consultancy Bain & Co and mainland consultancy Capvision Partners, have sent a chill through companies doing business with China, with many unclear where red lines stand as Beijing prepares to introduce tougher anti-espionage laws in July.
Moving people quickly out of Hong Kong underscores how the crackdown in China has unnerved some companies in the global financial hub, many of which are still navigating a national security law Beijing imposed on the city in 2020.
The moves over the past couple of months are meant to be a temporary measure to ensure staff safety, given the uncertainty of the Chinese police investigation, the sources said, involving about half a dozen staff including investigators and the head of the Hong Kong office.
A source with direct knowledge of the matter, and four other sources briefed by Mintz employees, said the firm had engaged in corporate due diligence to investigate the possible use of forced labor in supply chains linked to China’s Xinjiang region until this year.
Reuters could not determine whether the Chinese police investigation was triggered by Mintz’s work on Xinjiang. But at least two other top executives at international due diligence firms operating in China told Reuters that authorities had explicitly warned them against such work in recent months.
One of the sources who has dealt with Mintz in a business capacity said several of the Hong Kong-based Mintz employees are now in Singapore and there are no plans for them to return to Hong Kong until the investigation by Chinese authorities is over.
No one was present when Reuters visited Mintz’s Hong Kong office during business hours, with the doors locked and the lights off. A building management office worker said Mintz was still paying rent on his office, but two employees at neighboring offices said no one had been seen at the Mintz premises in recent months.
Several Mintz employee profiles have been removed from Mintz’s website, according to a Reuters review of archived versions of the site. It was not clear the role of all those who had left.
Mintz declined to comment.
Mintz confirmed the attack at its Beijing office in late March, saying at the time that it had closed operations there and that it was ready to work with Chinese authorities to “resolve any misunderstanding that may have led to these events”.
XINJIANG ‘OFF LIMITS’
While Chinese authorities have not detailed the scope of the investigation into Mintz, the office raid and detentions of five mainland Chinese employees, including the head of Mintz’s Beijing office, have rattled the professional advisory industry in China, with ripples now being felt in Hong Kong.
As a global financial center, Hong Kong has a deep pool of professional services talent, including in corporate research, with international firms including Kroll, Control Risks, McKinsey and FTI based there.
In recent years, following the passage of a national security law imposed by China in 2020, the United States has revised its risk assessment for American citizens in Hong Kong, highlighting the increased risk of arrest, detention, deportation or prosecution.
Chinese and Hong Kong authorities reject Western criticism of the national security law, saying that human rights are respected and that all countries, including the United States, need such laws.
China’s Public Security Bureau did not respond to Reuters requests for comment. The Ministry of State Security has not been available for comment.
China’s State Council Information Office, the Ministry of Foreign Affairs and the Hong Kong and Macau Office did not respond to Reuters requests for comment.
The Hong Kong government said it does not comment on individual business decisions.
A number of laws and regulations passed under President Xi Jinping’s rule – including laws on cyber security, personal information protection, data security, as well as the upcoming anti-espionage law that will ban the transfer of all information related to national security – have complicated the landscape for compliance.
Two due diligence executives with international firms with extensive business in China said Chinese security officials have regularly held meetings in recent years to issue explicit warnings about areas to avoid in corporate investigations.
“They would tell us exactly which areas are off-limits,” said one manager. “Xinjiang was one of these.”
Rights groups accuse Beijing of abuses against mainly Muslim Uyghurs in the western region of Xinjiang, including mass use of forced labour.
The United States has compiled a list of companies it sanctions for using forced labor in Xinjiang, and has passed a law requiring the companies to prove that goods sourced there are free of forced labor.
China denies abuses in Xinjiang, a major cotton producer and supplier of materials for solar panels.
Mintz’s Asia chief, Randal Phillips, a former senior CIA official, co-authored an article on the firm’s website last year about “sanctions due diligence” under the Uyghur Forced Labor Prevention Act, specific to Xinjiang, which has since been removed .
Phillips wrote “for some suppliers, public records and questionnaires may be sufficient; for others, independent verification, on-the-ground surveys, and interviews with industry sources may be required.”
Phillips declined to comment.
Reporting by James Pomfret in Hong Kong, Engen Than in Shanghai and Hong Kong Newsroom; Editing of Lincoln Feast
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