Factbox-From raids to exit bans, US companies face growing hurdles in China

WASHINGTON (Reuters) – Commerce Secretary Gina Raimondo said on Tuesday that U.S. companies have complained to her that China has become “uninvestible,” pointing to fines, raids and other actions that have made it risky to do business in the world’s second-largest economy.

Below are details on some of the bigger hurdles for doing business in China in recent years.

Raids and fines:

Chinese authorities raided the Mintz Group’s Beijing office in March and detained all five local staff, in what turned out to be the beginning of a sweeping crackdown on consultancy and due diligence firms, including Bain & Co’s office in Shanghai and Capvision Partners.

The Beijing Municipal Bureau of Statistics later confiscated 5.34 million yuan of Mintz’s “illegal proceeds” and imposed an administrative penalty of an equivalent amount, resulting in a total fine of about $1.5 million.

The agency said the company had carried out “foreign-related statistical investigations” without seeking and obtaining approvals. Mintz has said it was ready to work with the Chinese authorities to “resolve any misunderstanding that may have led to these events”.

Exit bans:

China is increasingly barring people from leaving the country, including foreign executives. A Reuters analysis of records on exit bans, from China’s Supreme Court database, shows an eightfold increase in cases mentioning the bans between 2016 and 2022.

Slow regulatory approvals:

Earlier in August, Intel Corp (NASDAQ:) scrapped its $5.4 billion deal to buy Israeli contract chipmaker Semiconductor Ltd Tower after their merger agreement expired without regulatory approval from China.

Last year, DuPont (NYSE:) De Nemours Inc scrapped its $5.2 billion deal to buy electronics materials maker Rogers (NYSE:) Corp after delays in securing approval from Chinese regulators.

Counterespionage law:

Chinese lawmakers passed a wide-ranging update to Beijing’s anti-espionage legislation in April, banning the transfer of any information related to national security and broadening the definition of spying.

The law, which took effect in July, has alarmed the United States, which has warned that foreign companies in China could be punished for regular business activities.

All “documents, data, materials, and items related to national security and interests” are under the same protection as state secrets following the revisions, according to the full text of the revised law published by Xinhua. The law does not define what falls under China’s national security or interests.

Questions about due process:

Secretary Raimondo said there was “no rationale given” for Chinese actions against chipmaker Micron Technology (NASDAQ:), whose products were restricted by Beijing earlier this year. “There has been limited due process,” she said.