Clarity Sought by Chinese Firms Under Business Group after Security Rule Modification and Consultant Raid

Foreign firms operating in China are facing uncertainty following a police raid on a consulting firm. The raid has left businesses unsure about what they will be allowed to do in the future. New and expanded national security and other rules may come into play. The foreign business association has said it wants “more clarity” on the rules. A survey conducted by The British Chamber of Commerce found its members to be more optimistic after anti-virus restrictions were lifted in December. However, members still want steps to “restore trust and certainty” in China. They are sceptical about an official plan to boost economic independence and are waiting to see how this affects their suppliers.

Approximately 70% of companies say they are waiting to see what the situation will be before taking action. Although President Xi Jinping’s government welcomes foreign companies, some are uncomfortable with the largely unexplained expansions of national security and other regulations, subsidies, and market barriers. These have strained relations with the European Union, Washington, and others. There is a government plan to create competitors for suppliers, and the government has banned the use of products from Micron Technology, the largest US memory chip maker, in computers that handle sensitive information.

Businesses are also on edge after police raided the offices of two consultancies (Bain & Company and Capvision), and a due diligence firm (Mintz Group). Authorities have offered no explanations. The British Chamber of Commerce represents approximately 650 companies, many of which are in financial, consulting and other service industries and affected by increased regulation of what information can be collected in China and how it is used and stored.

There is concern that companies are unsure how to comply with the law due to the lack of clear information about what is and is not acceptable. Sally Xu, Director of Government Relations at the chamber, said all members who responded to the request for questions before next week’s meeting with Commerce Department officials had asked about the consultant’s research.

The business environment in China is described as unpredictable, political tensions are rising, and there is increasing talk of self-sufficiency. The outlook is clouded by these circumstances, despite optimism following the lifting of anti-virus restrictions. The British Chamber of Commerce in China has made 171 proposals for Chinese regulators. These include “more clarity” on data regulation for the auto industry and addressing the mistreatment of foreign firms in government purchases. Chairman of the Chamber of Commerce, Julian McCormack, said “With more clarity and more certainty, we believe companies will make even greater contributions to China.”

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