Chinese authorities have detained five local staff members of US corporate due diligence firm Mintz Group in Beijing after raiding their office. The event has put foreign companies in China on alert, as it comes amid growing tension between China and the US.
The Mintz Group, which specializes in background checking, fact gathering, and internal investigations, has its only mainland China office in Beijing. The office was raided on the afternoon of March 20, according to a source at the New York-based firm who spoke to Reuters on condition of anonymity. The employees are reportedly being held incommunicado somewhere outside of Beijing.
The raid and detentions follow months of diplomatic tensions between China and the US, including over the recent downing of a Chinese spy balloon by the US military and a planned US transit next week by the president of Taiwan, which China claims as its territory.
In an emailed statement to Reuters, the Mintz Group confirmed that Chinese authorities had detained the five staff members, all of whom are Chinese nationals, and had closed the company’s operations in Beijing. The statement added that the company was ready to work with the Chinese authorities to “resolve any misunderstanding that may have led to these events”, and that its top concern was the safety and wellbeing of colleagues in China.
The Beijing public security bureau has not responded to requests for comment on the case. Chinese foreign ministry spokeswoman Mao Ning said on March 25 that she was not aware of the case.
The news of the raid and detentions comes as Beijing is gearing up to hold the three-day China Development Forum from March 26, where executives from multinationals and representatives from international organizations will be among the more than 100 overseas delegates present.
One US business community person told Reuters the Mintz Group incident sent a “remarkable signal” that Beijing wants foreign money and technology but that it won’t accept credible US firms conducting due diligence on Chinese partners or the business environment. “Red alerts should be going off in all boardrooms right now about risks in China,” the source said.
US businesses operating in China are increasingly pessimistic about their prospects in the world’s second-largest economy, according to a survey released this month by the American Chamber of Commerce in China. Two-thirds of the respondents cited rising US-China tensions as the top business challenge.
Western due diligence companies have got into trouble with Chinese authorities before. In 2013, British corporate investigator Peter Humphrey and his American wife Yu Yingzeng, who ran risk consultancy ChinaWhys, were detained following work they did for British pharmaceuticals group GSK. Humphrey, who spent two years in jail for allegedly acquiring personal information by illegal means, which he denied, told Reuters that providing due diligence in China was even harder now because of a “massive tightening in access to information.”
“The foreign business community needs due diligence in order to conduct safe business, to pick the right partners and the right hires, to invest in the right companies without losing their shirt … But Beijing has made it impossible to do this,” he said in an email.
The Mintz Group has 18 offices around the world and hundreds of employees. Randal Phillips, a partner at the firm who heads its Asia operations but is based outside of China, is listed on its website as the Central Intelligence Agency’s former chief representative in China. However, there was no indication the incident was related to him, and Reuters was unable to reach him for comment.