Several lawmakers are urging the Biden administration to investigate McKinsey & Company’s ties to China, claiming that the consulting giant has failed to disclose its business relationships with the Chinese government, potentially violating U.S. federal laws.
In a letter addressed to Attorney General Merrick Garland and Defense Secretary Lloyd Austin, Republican senators Marco Rubio and Joni Ernst, along with John Moolenaar, the chairman of the House Select Committee on the Chinese Communist Party, raised concerns about whether McKinsey’s operations in China pose a threat to U.S. national security. They argue that there are potential conflicts of interest between McKinsey’s China-based dealings and the Pentagon, which they believe may contravene federal regulations.
According to a Reuters report, the trio of lawmakers questioned McKinsey’s process in securing a $480 million consulting contract with the Department of Defense, alleging that the firm concealed its close ties to the Chinese government and state-owned enterprises, thus jeopardizing U.S. national security.
The lawmakers stated, “Our review of existing documents from the Department of Defense indicates that McKinsey has repeatedly failed to disclose its collaborations with the Chinese government when obtaining contracts.” They added, “McKinsey’s activities pose serious risks to U.S. national security and may not comply with the obligations required under federal law.” They specifically pointed to McKinsey’s close relationships with Chinese government entities, noting that its business operations benefit the Chinese military and economy.
As of now, McKinsey has not responded to these allegations. During a congressional hearing, a representative from the firm claimed that their operations in China do not involve state-owned enterprises or government at any level, but rather focus on multinational companies and private firms, adhering to the strictest industry regulations.
Additionally, a report by The Wall Street Journal on the 16th highlighted that McKinsey is in the process of restructuring its operations in China. The firm has already reduced its government-related clientele and cut approximately 500 jobs—about one-third of its staff in China.
Insiders have disclosed that McKinsey has been working to separate its Chinese operations from its global business to mitigate potential risks associated with its presence in the country. Over the past two years, the firm has laid off hundreds of employees in the Greater China region, including those in Hong Kong and Taiwan. As of June 2023, McKinsey’s website indicated that it employed nearly 1,500 people in the Greater China area.
