Forrester Research, a US research group focused on technology, told staff it plans to cut most of its Chinese analysts after Beijing tightens its grip on Western consultancies in the country.
The Boston-based firm plans to lay off several dozen employees in China, according to three people familiar with the matter, as company executives react to an intensified crackdown on Western research and due diligence firms.
When asked about the plans, Forrester said it would close its China office as part of a previously announced global restructuring driven by economic woes and changes to its products.
Two people with direct knowledge of the matter said Forrester’s US headquarters decided to cut jobs in China in response to the recent tightening of restrictions on Western consultancies screening Chinese investments and business partners looking for foreign clients .
Another company insider said weak revenues in 2022 from global operations contributed to the decision to cut staff in China. Group net earnings fell $3 million to $22 million in 2022 from a year earlier, according to its annual report. Approximately 10% of the group’s more than 2,000 employees are employed in the Asia-Pacific region.
The decision took some local employees by surprise. A person familiar with the layoffs said: “I wasn’t expecting this at all. I never thought something like this would happen so fast.”
Forrester said most of its restructuring was taking place in the United States. “The unstable economy, coupled with our continued product transformation, are the key drivers for change,” the company said.
It added that its business in China was “non-material” in relation to global revenue and it would serve clients in the country through its global research team.
During Forrester’s latest earnings report this month, founder and chief executive officer George Colony said the group “is taking actions to maintain our margins by reducing [its] cost structure to align with [its] expected income”.
Several analysts from consulting firms in mainland China told the Financial Times that it is becoming increasingly difficult to satisfy requests for information on Chinese industries from foreign clients. Beijing is setting increasingly stringent red lines on what kind of information is deemed sensitive to national security and cannot be shared with foreign parties.
Last month, Beijing broadened the scope of an already broad espionage law to include “all documents, data, materials and articles pertaining to national security and interests.”
Chinese officials have launched a series of raids on consulting firms in China, including Capvision, Bain & Company and due diligence group Mintz. Investors and foreign multinationals let’s say repression it will make it difficult to carry out the necessary due diligence to proceed with investments or sign contracts with Chinese partners and suppliers.
On Monday, the Chinese media reported that state security services had raided multiple offices of consulting firm Capvision, accusing the group of wiretapping personnel in “organs of our party and government and other clandestine units” to provide sensitive information to foreign clients.
The crackdown comes at an awkward time for Beijing, which has launched a glamor offensive trying to lure foreign and private investors back to mainland China, after abandoning its controversial zero-Covid policy late last year.
“Private equity and hedge funds have a fiduciary responsibility to hire advisers and demonstrate that they have conducted due diligence. It becomes a very different kind of market when you don’t have the tools to make your own assessments,” said an industry insider.
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