China cuts links with consulting firms in US

Reported move came shortly after Washington accused five Chinese PLA officers of cyberespionage

 FBI executive associate director Robert Anderson (centre), flanked by attorney general Eric Holder  and assistant attorney general for national security John Carlin, speaks about a federal indictment against five Chinese military officials for cyber espionage at the Justice Department in Washington, DC. Photograph: EPA/Jim Lo Scalzo/EPA

FBI executive associate director Robert Anderson (centre), flanked by attorney general Eric Holder and assistant attorney general for national security John Carlin, speaks about a federal indictment against five Chinese military officials for cyber espionage at the Justice Department in Washington, DC. Photograph: EPA/Jim Lo Scalzo/EPA

Tue, Jun 3, 2014, 01:00

The news came as a shock to even seasoned China-watchers – a Financial Times story saying China told its state-owned enterprises to cut links with US consulting firms just days after Washington charged five Chinese military officers with hacking US companies.

McKinsey, the Boston Consulting Group (BCG), Booz & Company and Bain were being frozen out amid fears they were providing trade secrets to the US government. China warned it would retaliate if Washington pressed ahead with allegations the Chinese officers hacked into US firms.

So was this the retaliation? If it’s true, it represents a considerable escalation in tensions.

As we reported last week, China also banned new central government computers from using Windows 8, Microsoft’s latest operating system.

All of the big consultancy firms have major operations in China, including state-owned enterprises, so any move would come as a blow.

The consultancy companies either declined to comment or denied the existence of notification from senior leadership that they were being booted out.

In some ways it was similar to two years ago when the Beijing government introduced changes to the accountancy market which meant only accountants with Chinese qualifications could be partners in the audit practices of the Big Four firms.

It will be interesting to see how this story develops and if the big consultants are only the first to feel the sting of tougher trade links between the world’s two biggest economies.

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