US-based Forrester Research to close China office amid Beijing's crackdown of foreign advisories
Forrester Research, a US technology research and advisory firm, is closing its office in mainland China and laying off most of its analysts in the country amid an intensifying government crackdown on multinational consultancies.
The Boston-based company has already begun letting staff go in the country, with only a few employees being retained to wrap up ongoing projects, according to a person with knowledge on the matter, who declined to be identified because of the sensitivity of issue. The lay-offs came as a surprise, the source said.
In response to an enquiry by the Post, Forrester said on Wednesday it was shutting its China office as part of a previously announced global restructuring.
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"The unsteady economy, along with our ongoing product transformation, are the key drivers for the change," the company said in a statement. "We remain committed to servicing our clients in China and global clients with operations in China through our global research team."
A company spokeswoman declined to comment on a recent Financial Times report citing anonymous sources that said the job cuts were in response to China's increased scrutiny of Western consultancies and due diligence firms.
Over the past few months, Chinese officials have launched a series of investigations into global advisory firms with operations in the country.
Major targets have included Boston-based Bain & Company, which has offered some of its employees in China a six-month leave with reduced pay after police last month questioned staff at its Shanghai offices, as well as New York-headquartered Mintz Group, which saw five of its local Chinese employees arrested.
Authorities also raided Capvision Partners offices in several Chinese cities, according to a state broadcaster news report this month that accused the firm of providing sensitive information to overseas clients and intelligence agencies.
Flags flutter in front of the Capvision Partners headquarters building in Shanghai, China. Photo: EPA-EFE alt=Flags flutter in front of the Capvision Partners headquarters building in Shanghai, China. Photo: EPA-EFE>
China's foreign ministry spokesman Wang Wenbin said last week that the raid was a "normal act of law enforcement".
Bain has said it was "cooperating as appropriate" with authorities, while Capvision said it had set up a committee to rectify its operations under the guidance of Chinese authorities.
China's growing scrutiny of foreign consulting firms, along with an updated anti-espionage law coming in July that broadens the definition of spying, has unnerved some foreign businesses, which fear that their current activities will suddenly be considered criminal.
Some local experts said Beijing's moves have sent a strong warning signal to the industry and potential clients. Meanwhile, industry players have said that companies that are normally served by global advisers might adopt a cautious approach to China or withhold investments completely.
Pedestrians seen on a street in Shanghai, China. Photo: Reuters alt=Pedestrians seen on a street in Shanghai, China. Photo: Reuters>
A number of financial institutions have already reportedly taken precautionary measures, such as suspending expert interviews with foreign analysts.
"If there is a growing trend of foreign companies shutting down their operations in China, it would be detrimental for all parties involved," said Qiao Yide, vice-chairman of the Shanghai Development Research Foundation, adding that foreign companies will need to "be mindful of national red lines".
"It would be helpful if the authorities would more clearly delineate the areas in which companies can or cannot conduct such due diligence," said Eric Zheng, president of the American Chamber of Commerce in Shanghai, in response to the raid of Capvision.
According to Forrester, the size of its China business was not material in relation to its global revenue, and most of its restructuring is taking place in the US.
About 12 per cent of the group's more than 2,000 staff were employed in the Asia-Pacific region as of the start of this year, it said. At least 24 employees were based in China, according to information found on LinkedIn.
Forrester's net income fell by US$3 million to US$22 million in 2022, its annual report showed. In its latest earnings report this month, which revealed an almost 10 per cent fall in first-quarter revenue year on year, founder and CEO George Colony said the company was taking actions to maintain its margins by reducing costs.
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