Forrester Research, a US tech-focused research group, has told staff it plans to cut the majority of its China analysts after Beijing intensified scrutiny of western consultancies in the country.
The Boston-based firm plans to fire several dozen employees in China, according to three people with knowledge of the matter, as company executives react to an intensifying crackdown on western research and due diligence companies.
Asked about the plans, Forrester said it was closing the China office as part of a previously announced global restructuring that was driven by economic issues and changes to its products.
Two people with direct knowledge of the matter said Forrester’s US headquarters decided to cut the jobs in China in response to the recent tightening of restrictions on western consultancies scrutinising Chinese investments and business partners for foreign clients.
Another company insider said weak revenues in 2022 from global operations contributed to the decision to cut staff in China. The group’s net profits fell by $3mn to $22mn in 2022 compared to the previous year, according to its annual report. About 10 per cent of the group’s more than 2,000 staff are employed in the Asia Pacific region.
The decision caught some local staff by surprise. One person with knowledge of the lay-offs said: “I didn’t see it coming at all. I never thought something like this would happen so fast.”
Forrester said most of its restructuring was taking place in the US. “The unsteady economy, along with our ongoing product transformation, are the key drivers for the change,” the company said.
It added that its China business was “not material” in relation to global revenue and it would service clients in the country through its global research team.
During Forrester’s latest earnings report this month, founder and chief executive George Colony said the group was “taking actions to maintain our margins by reducing [its] cost structure to align with [its] expected revenue”.
Several analysts at consultancies in mainland China have told the Financial Times it is becoming increasingly challenging to service foreign clients’ requests for information on Chinese industries. 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 expansive espionage law to include “all documents, data, materials and articles concerning national security and interests”.
Chinese officials have launched a series of raids on consultancies in China, including Capvision, Bain & Company and due diligence group Mintz. Investors and foreign multinationals say the crackdown will make it difficult to carry out the due diligence necessary to proceed with investments or sign contracts with Chinese partners and suppliers.
On Monday, Chinese media reported that state security services had raided multiple offices of consultancy Capvision, accusing the group of tapping personnel in “our party and government organs and other clandestine units” to provide sensitive information to overseas clients.
The clampdown comes at an awkward time for Beijing, which has launched a charm offensive trying to woo foreign and private investors back to mainland China, after it ditched its controversial zero-Covid policy at the end of last year.
“Private equity and hedge funds have a fiduciary responsibility to hire consultants and show that they’ve conducted due diligence. It becomes a very different kind of market when you don’t have the tools to make your assessments,” said one industry insider.
Source: Economy - ft.com
