It appears the tit-for-tat cyber-spying debacle between China and the US is escalating (unless it's all curious coincidence). Having blasted the US as a "mincing rascal" and "high-level hooligan" in the Chinese (state-run) media, The FT reports that authorities have ordered state-owned enterprises to cut ties with US consulting companies such as McKinsey and Boston Consulting Group because of fears they are spying on behalf of the US government. Furthermore, the crackdown is worse as, in the face of the "US hacker empire," China’s leaders announced on Thursday that all foreign IT products and services sold in China would be subject to a new security screening process. So it seems China has entered both the currency war (CNY weakness) and protectionism racket... now how has that ended for the world in the past?
As The FT reports, China has ordered state-owned enterprises to cut ties with US consulting companies such as McKinsey and Boston Consulting Group because of fears they are spying on behalf of the US government, according to people close to senior Chinese leaders.
The instruction comes days after the US Justice Department indicted five People’s Liberation Army officers on charges of cyber-espionage and stealing trade secrets from US corporations including Alcoa, US Steel and Westinghouse.
Beijing’s response to the indictments was swift, with a propaganda campaign in Chinese state media describing the US as a “mincing rascal” and “high-level hooligan”. The decision to ban state enterprises from working with western consulting companies marks a further escalation in Beijing’s response.
Management consultancies including McKinsey, BCG, Bain & Company and Strategy&, formerly known as Booz & Co, have extensive operations in China, which remains a rapidly growing market for them.
In the face of US accusations over cyber attacks and industrial espionage, Chinese officials say their country’s ministries, companies, universities and telecoms networks are under constant attack from the “US hacker empire”.
Furthermore, partial protectionism appears to be looming...
“The top leadership has proposed setting up a team of Chinese domestic consultants who are particularly focused on information systems in order to seize back this power from the foreign companies,” said a senior policy adviser to the Chinese leadership. “Right now the foreigners use their consulting companies to find out everything they want about our state companies.”
China’s leaders announced on Thursday that all foreign IT products and services sold in China would be subject to a new security screening process. Any company, product or service that fails the test will be banned from China.
The vetting will focus on products and services used in communications, finance, energy and any other industries the government considers related to national security or “public interest”, officials said.
“Under President Xi Jinping, technology and implementation will look to be converging, so foreign tech firms should be very worried about their prospects.”
The last time the world's largest trading partners devolved into a pissing match over competitively devalued currencies and protectionism... didn't end too well - but this time is different because central banks print magic money to fix everything.