Australian consulting leaders will be anxious over China spy arrest

16 January 2024 Consultancy.com.au 4 min. read

Many Australian business leaders will be feeling anxious in the wake of China’s claimed arrest of an unnamed foreign consultancy leader on allegations of spying for British intelligence agency MI6.

The Chinese government has upped the ante in its pursuit of locally-operating international consultancies, arresting what it claimed to be the foreign leader of a major firm on allegations of espionage.

The Ministry of State Security, which serves as the country’s primary intelligence agency, has accused the individual of spying for the UK’s MI6, but has provided no further details or updates since other than revealing the detainee’s surname as Huang.

The arrest follows last year’s series of raids on the local offices of a number multinational consulting firms, including US management giant Bain & Company, during which its employees in Shanghai were subjected to questioning. Earlier, local authorities had shut down the Beijing branch of fellow US-headquartered consultancy Mintz Group and detained five of its staff, all Chinese nationals, over what were said to be suspicions the firm had engaged in “unlawful operations”.

As the country’s largest trading partner, the latest developments would be leaving many business leaders in Australia feeling particularly nervy, including the local branches of global consultancies with close office ties to their China counterparts. Alongside Bain, both McKinsey and Boston Consulting Group have long histories in the country, while Deloitte for example unified its Asia Pacific operations in 2019, which are currently headed by Australian chief David Hill.

Notably, Mintz specialises in due diligence, with political commentators pointing out that the standard leg-work carried out by such Western consultancies for investment and M&A clients abroad would likely serve as a trigger in a sensitive local context, considering many Chinese companies are state-owned or controlled.

Meanwhile, in addition to its inbound corporate services, Bain boasts of having built up the biggest private equity consulting practice in the world.

Here, events in China are commonly viewed through a geopolitical lens by outside observers, as tit-for-tat retaliations or a means to put pressure on foreign governments in advancing national interests. In 2019, at the height of recent US-China tensions, China was also engaged in a diplomatic spat with Canada over several back-and-forth arrests, with former McKinsey global managing partner and Asia boss Dominic Barton ultimately brought in as an ambassador to help smooth relations.

Australia hasn’t been spared of similar tensions, albeit to a lesser degree, with China in recent times having imposed tariffs at the surface level on a number of the nation’s primary exports following inflammatory rhetoric from the government in the wake of Covid-19. Of note, the current Australian government is in the process of prosecuting Sydney consultant Alexander Csergo on charges of ‘reckless foreign interference’ for allegedly selling national security secrets to China.

The most recent entry on Csergo’s LinkedIn page is as president for global innovation & transformation at Conversys, a Shanghai-based digital consultancy for the automotive, media, and infrastructure industries he says has worked on joint business transformation market initiatives with leadership at Capgemini, KPMG and Accenture. That trio of firms alone have a combined Greater China headcount in excess of 40,000 professionals, including dozens of foreign partners and staff.

Meanwhile, Bain’s consumer & retail lead partner for China, French national Bruno Lannes, was following the recent arrest quoted in the local media on the unrelated topic of foreign investment, stating; “It’s important to take a longer term view on China instead of focusing on short-term volatilities. The bottom line is China still matters a great deal to multinational companies, and those equipped with adequate preparation, objective risk assessment, and sound competitive strategies can seize the rich opportunities the market has to offer.”