US Chamber of Commerce warns of rising risk of doing business in China

Washington lobby group says new scrutiny from Beijing has ‘dramatically’ increased uncertainty for western groups

The US Chamber of Commerce has warned that mounting Chinese scrutiny of American companies has “dramatically” raised the risks of doing business in the country, as signs emerge that Beijing may be cracking down on some foreign businesses. 

The powerful US business lobby group, led by chief executive Suzanne Clark, said in a statement on Friday it was “closely monitoring” China’s scrutiny of US professional services and due diligence firms. 

The warning comes days after the Financial Times reported that Chinese police had raided the Shanghai office of Bain, the US management consultancy. It also follows China’s introduction of a new counter-espionage law that has made foreign companies even more nervous. 

“In the context of China’s new counter-espionage law, which casts a wide net over the range of documents, data or materials considered relevant to national security, the additional scrutiny of firms providing essential business services dramatically increases the uncertainties and risks of doing business in the People’s Republic,” the US Chamber said.

The lobby group also urged Beijing to consult with foreign businesses on the new law and issue regulations that provide “reasonable clarity” and address investors’ questions.

Senior US officials and executives have become worried in recent weeks about a series of actions by Chinese authorities that have targeted US companies, particularly those involved in due diligence and risk assessment, or working on projects involving advanced technology supply chains. Last month, authorities raided the Beijing office of due diligence group Mintz Group and detained five employees.

The Biden administration has also become increasingly concerned about the apparent rise in coercive activity in China. 

“We are concerned about a recent uptick in coercive actions targeting US firms, which comes at the same moment that China states that it is reopening for foreign investment,” Treasury secretary Janet Yellen said in a recent speech.

The increased scrutiny, accompanied by widespread speculation about actions against other western groups operating in China, comes at a time when Beijing has been trying to send a message that it welcomes foreign investment as it ends a long period of zero-Covid restrictions.

The chamber said it welcomed such pledges of openness but “foreign investment will not feel welcomed in an environment where risk can’t be properly assessed and legal uncertainties are on the rise”.

China last month opened a national security investigation into Micron, the Idaho-based manufacturer of memory chips. US officials believe Beijing is retaliating against measures taken by the Biden administration to make it much harder for Chinese companies to obtain advanced semiconductors.

The mounting concern comes weeks before the G7 summit in Hiroshima when national leaders are expected to discuss economic coercion in the context of what measures they could take to push back against Chinese actions.

Read more at Financial Times.

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