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China's new secureity law: Another home goal!

So back in 2022, the Chinese adopted a new security law.  Ostensibly it was to allow the Chinese police more latitude when investigating corporate malfeasance, guess what one of the off-shoots of this has been to prosecute at least three foreign consulting firm, where employees (mostly Chinese nationals) have been arrested, for espionage.

Guess what is the principal business of these foreign consultants:  Helping U.S. company navigate the complex and meandering road to establish operations in China.  Yes, the Chinese are going after the people that help foreign companies invest into China, BTW one of the firm is Bain & Co.  so we are not talking of small independent "fly by the seat of your pants" operations.

What do suspect happened.  Once, this became known (it emerged about two months ago, but was only confirmed by Bain & Co. in the last few days), the message to the entire foreign business community is that China will now consider almost anything as espionage!

Guess what, aside from the massive firms (like Tesla) the message could not be clearer.  Stay away!  In a sense, it doesn't really matter.  In terms of costs China is not really competitive anymore as wages have risen dramatically over the past decade (15x) and the quality of the work force has not improved.  

I would suggest that in today's economic, political and strategic world, investing plant and equipment in China is really not a sensible solution to lowering manufacturing costs, there are better and less expensive workforce elsewhere.

For the consultants, I suspect that this is the final call, as usual first the "foreign talent" will leave China (it probably already has).  A local will be "elected" as the new managing director/partner and sooner rather than later all foreigners in the firms will leave, and not be replaced.  The offices will soon become 100% Chinese national operations.

As revenues decline, as the main objective of the firm disappears the role of the consultants will change, first all new mandates will be to help "temporary relocation" of clients China based operations -- people and equipment to outright closure of Chinese operations, maybe facilitate the exports of certain Chinese made/assembled components to new "temporary" client locations outside of China.

In reality, most foreigners have already seen the writing on the wall, China's over-aggressive stance against the US for any real or perceived slights.  Will end badly for China it cannot be otherwise.  China's principal export markets are at the end of a very long transport route, and its vast majority of its imported energy and foodstuff requirements are equally far away.

If the US ever wants to blockade China it could simply say that it will no longer protect shipping destined for China...what can the Chinese do about that?  America is just saying that it will not protect Chinese shipping, China can take care of its own shipping security.  

The thing with the China based consultants is a typical "own goal"  if you attack the people who are trying to make you look good, well all bets are off!


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