A collective of Republican legislators is calling for a federal inquiry into the consulting firm McKinsey & Company regarding its engagements with the Chinese government and state-owned enterprises. This demand comes amid reports that the firm is modifying its operations in China to mitigate potential risks.
In a letter addressed to the Justice Department, which was signed by Rep. John Moolenaar (Michigan), Sen. Marco Rubio (Florida), and Sen. Joni Ernst (Iowa), the lawmakers questioned the compliance of McKinsey’s substantial contracts—valued at $480 million—with the Defense Department. They raised concerns due to McKinsey’s advisory role to various national and local Chinese government bodies and state-influenced enterprises. The legislators further accused the firm of misrepresenting its associations with the Chinese authorities.
According to the letter, dated Thursday, “McKinsey’s operations pose a significant threat to U.S. national security and may not align with the company’s obligations under federal statutes.” While McKinsey refrained from commenting directly on the letter, it has previously defended its operations in China, stating that it adheres to industry standards deemed “most rigorous and comprehensive” in client service policies.
The consultancy clarified that it does not engage with the Chinese Communist Party or the central government directly, focusing instead on multinational corporations and private businesses in China.
The scrutiny from U.S. lawmakers towards McKinsey’s connections with Beijing is intensifying as the competitive landscape between the U.S. and China evolves. American politicians are increasingly vigilant about business relationships to ensure that support that may inadvertently strengthen China’s military or governmental capabilities does not occur. Concurrently, there seems to be a growing apprehension within Chinese circles regarding American businesses.
The Biden administration has established export regulations intended to restrict China’s access to advanced technology, especially in fields such as microelectronics and artificial intelligence, which are crucial to military endeavors. Moreover, a recent report from Republican congressional members highlighted concerns that collaborative initiatives between U.S. and Chinese educational institutions could facilitate advancements in military technology for Beijing.
As U.S. companies navigate this shifting geopolitical environment, McKinsey has reportedly reduced its engagements with clients linked to the Chinese government and has cut its workforce in China by around 500 employees, representing a significant workforce reduction.
In their letter, the lawmakers contended that McKinsey’s consulting practices have effectively contributed to China’s rapid military and economic growth. They emphasized that McKinsey did not transparently disclose its advisory operations with the Chinese government while obtaining U.S. defense contracts, which provided the firm with access to sensitive national security information since 2008.
Bob Sternfels, McKinsey’s global managing partner, previously assured a Senate Homeland Security Committee’s subcommittee on investigations that, to his knowledge, the firm has “never worked for the Chinese Communist Party or the central government.” However, the letter asserts that the firm may have misrepresented its connections with Chinese authorities, referencing various public records and documents to support their claims.