US Chamber of Commerce warns of major increase in risks for businesses in China

By Michelle Toh, CNN

The United States Chamber of Commerce has warned that rising scrutiny of American firms in China “dramatically increases” the uncertainties and risks of doing business in the country.

The influential business lobby said Friday it was closely monitoring “heightened official scrutiny” of US firms by the Chinese authorities, following the questioning of employees at management consultancy Bain & Company in Shanghai and the shutdown of the Beijing office of due diligence provider Mintz Group.

“The services these firms provide are fundamental to establishing investor confidence in any market, including China,” the chamber said in a statement, without naming either company.

The events are particularly troubling given an amendment to an already extensive counter-espionage law in China, which widened the scope of the kind of materials and data the country deems relevant to national security, the group added.

The law was revised last week, and set to take effect in July.

“This is a matter of serious concern for the investor community and likely is as well for their local business partners in China,” said the chamber, which is led by President Suzanne Clark.

It noted that while Chinese officials had recently expressed an openness to greater foreign investment, investors would “not feel welcomed in an environment where risk can’t be properly assessed and legal uncertainties are on the rise.”

Last week, Bain confirmed that Chinese police had questioned staff at its Shanghai office. Few details were disclosed, including the reason for the visit, the status of employees who were questioned or their nationalities.

The news came a month after Chinese authorities closed the Beijing offices of Mintz, detaining five of its local staff. The Chinese foreign ministry later said Mintz was “suspected of illegal business operations,” though the company said it had complied with the country’s laws.

The cases coincide with a rise in tension between the United States and China, which has badly dented the confidence of American businesspeople working in the world’s second largest economy.

The news about Bain has spooked the US business community in China, the American Chamber of Commerce in China told CNN last week.

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