Capvision, a large consultancy with a network of experts, said it had completed a "rectification" under the guidance of Chinese government authorities. Companies operating in China now face greater scrutiny from authorities.
Chinese police raided the company's offices in May, and state television broadcast news of an investigation into some of its activities alleged to run counter to national security laws. China Central Television said at the time that some consulting firms had become accomplices in "spying, buying and extracting state secrets and intelligence" from abroad. The company said late Tuesday that it had revised its internal operating systems to comply with China's national security laws.
The clampdown on Caixin fits into a series of regulatory actions this year that have made foreign companies nervous about operating in China. Chinese authorities have barred some corporate executives from leaving the mainland, raided the offices of Mintz Group, an American due diligence firm, and raided the offices of Bain &amp, an American consulting firm. Co.) employees conducted interviews and implemented strict data cross-border regulations.
A senior investment banker at Nomura, the Japanese investment bank, also told his employer that he could not return to Hong Kong.
Economists warn that the increased scrutiny companies face in China could hamper the country's efforts to attract foreign investment. China's economic growth has slowed this year due to a sharp drop in exports and a prolonged property slump.
With headquarters in Shanghai and New York, Caixin connects financial institutions, investors and other clients with individual advisers who provide industry intelligence. These consultants are often regarded as experts in their field, and their knowledge and personal insights can earn them consulting fees of up to $10,000 per hour. Its clients include multinational banks and asset managers.
In previous raids, the police questioned the company's Chinese employees about the names of China experts in its service network. Shortly thereafter, the company set up a compliance management committee of three senior executives and pledged to comply with Chinese regulations.
The company said on Tuesday that it had put in place a more comprehensive compliance system in recent months under the guidance of government authorities. The company said it had been informed by the Chinese government that its changes complied with government testing standards and requirements. The company said it would actively safeguard China's national security.
Expert network consulting firms can sometimes provide an information advantage to investors and companies, and many multinationals use them to gather valuable analysis of conditions inside China. These consulting firms are subject to censorship by the Chinese government, which aims to control information published about China and companies based in China.
Last year, Chinese state security agents investigated whether former government officials leaked information about the country's coronavirus policy and vaccine strategy ahead of its release, according to the Wall Street Journal. Many international investors and companies were keen to have access to this market-sensitive information.
The Chinese government has recently stepped up scrutiny of companies, often citing national security as a reason. In July, China began enforcing a revised counterespionage law that gives the state greater control over a range of data and digital activities.
Foreign business concerns have also been heightened by China's increasing number of exit bans, which often target people helping with investigations. The practice has prompted the U.S. State Department to advise people to reconsider traveling to China because of the risk of arbitrary detention. China dismissed the U.S. warning, saying it was politically motivated.
The company was founded in China in 2006 by former Bain advisors and former Morgan Stanley investment bankers. The company previously said it has more than 2,000 customers and is expanding in the United States. According to a draft listing prospectus, the company will have nearly 400,000 experts from companies, academia and other fields as a steady source of information by 2021. The company's share sale did not go ahead.