What's Happening?
Global consulting firms like KPMG, Bain & Company, and EY are employing unconventional strategies to maintain operations in China amidst tightening Western sanctions and Beijing's growing hostility toward foreign influence. These firms are reportedly
using intermediary strategies and sanctioned partnerships to circumvent barriers that prevent them from working with state-linked or sanctioned entities. KPMG assisted Russia's Sberbank with its expansion into China, while EY used a third-party tech firm to pitch for a project with Chongqing Rural Commercial Bank. Despite the risks, these firms are incentivized to find a path forward as their revenue growth in China has slowed since 2022.
Why It's Important?
The strategies employed by consulting firms in China highlight the complex geopolitical landscape and the challenges of operating in a market with stringent regulations. As tensions between China and the West escalate, firms must navigate legal and ethical dilemmas to maintain their presence in the region. The use of intermediaries and sanctioned partnerships poses reputational and regulatory risks, with potential consequences from US authorities. The situation underscores the need for firms to balance compliance with business interests, as they face pressure from Washington's secondary sanctions targeting foreign entities that support sanctioned parties.
Beyond the Headlines
The consulting firms' maneuvers in China reflect broader trends in international business, where companies must adapt to shifting geopolitical dynamics and regulatory environments. The situation raises ethical questions about the extent to which firms can push the boundaries of compliance to achieve business objectives. As global tensions continue, firms may need to reassess their strategies and prioritize transparency and accountability in their operations. The challenges faced by consulting firms in China could influence future regulatory policies and business practices, shaping the landscape of international commerce.
