China’s clampdown on its consultancy and due diligence sector has driven companies to review their operations after some tested the limits of the laws and Beijing’s patience to meet surging demand as China emerged from its COVID-lockdowns. Some of these firms in China outsourced risky work to contractors and took on projects they knew might irk authorities even before an official crackdown started in recent months, according to half a dozen people familiar with the industry.
And on April 26, Chinese lawmakers passed a wide-ranging update to anti-espionage law banning the transfer of any information related to national security and broadening the definition of spying, further rattling the sector.
“Just about everything they do on the ground puts them at risk,” said Dan Harris, a corporate lawyer with past dealings in China, who has had clients who have conducted supply chain due diligence in China.