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US Republicans call for McKinsey to be banned from federal contracts

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Top Republican lawmakers have known as for McKinsey to be banned from securing federal contracts within the US following the revelation {that a} think-tank led by the consulting agency gave coverage suggestions to the Chinese central authorities.

Marco Rubio, the vice-chair of the Senate intelligence committee, and Michael McCaul, the chair of the House international affairs committee, mentioned McKinsey had undermined US safety by way of the think-tank’s position within the growth of Beijing’s 13th five-year plan in 2015.

“It’s shocking that a US company allegedly supported the Chinese Communist party’s efforts to develop policies and plans that violate international trade rules and threaten American national security and economic interests,” McCaul advised the Financial Times on Friday.

“Companies supporting our adversaries’ military or human rights abuses shouldn’t receive contracts paid for with the taxpayer money of hardworking Americans.”

McCaul was responding to an FT report that the Chinese authorities’s central planning company had commissioned a McKinsey-led think-tank known as the Urban China Initiative to produce analysis for Beijing’s 2016-2020 five-year plan.

That plan dedicated China to boosting its technological capabilities and contributed to an increase in Sino-US tensions, which has included a extra hawkish temper in Washington in direction of western companies’ work in China.

Bob Sternfels, McKinsey’s world managing accomplice, this month advised Congress he was unaware of the agency having ever labored for the Chinese central authorities. McKinsey this week stood by the assertion, saying UCI was a separate entity arrange in partnership with two universities and McKinsey had not authored the analysis that UCI did for China’s National Development and Reform Commission.

“McKinsey appears to have lied multiple times about its relationship with the Chinese Communist party,” Rubio advised the FT. “We need to learn more about McKinsey’s role in helping develop China’s five-year plans, but at this point it is impossible to justify any McKinsey contracts with the US government.”

In response to the FT story, Republican Senator Josh Hawley additionally mentioned McKinsey ought to now not be ready to acquire federal work.

“McKinsey — and any consulting firm that helps China — should be BANNED from getting US government contracts,” Hawley wrote on X.

A spokesperson for the Democratic workers of the House China committee mentioned the FT report was “deeply concerning” and the panel would be inquiring into the matter. “We remain committed to understanding how the CCP capitalises on American expertise, and how US experts navigate conflicts of interest,” he mentioned.

Responding to the lawmakers’ feedback, McKinsey mentioned: “We reject efforts to use a document McKinsey didn’t write and work we didn’t do to call into question our 75-year history of supporting the US government.”

The agency has received $1bn in contracts from the US federal authorities since 2008, in accordance to the USAspending.gov database, and can also be usually a subcontractor on tasks led by others.

It has been frozen out of consulting for the Food and Drug Administration, the US medicines regulator, for the previous three years after its work for opioid producers attracted battle of curiosity accusations, leaving the US defence division as its greatest federal authorities shopper. The Pentagon has steered a minimum of $450mn in work to McKinsey since 2008, in accordance to the database, and the determine is probably going to underestimate the full as a result of delicate nationwide safety contracts are excluded.

In the newest fiscal 12 months to September 2023, McKinsey was paid a minimum of $101mn by the federal authorities, together with $63mn from the Pentagon. The agency has annual revenues of about $16bn globally.

The UCI’s work for Beijing in 2015 got here within the type of a 310-page e-book that suggested deeper co-operation between the Chinese navy and enterprise and insurance policies to push international corporations out of delicate industries, amongst dozens of suggestions.

The e-book drew on work by McKinsey’s in-house analysis arm, in accordance to an introduction written by Lola Woetzel, UCI founder and co-chair, who’s one in all McKinsey’s most senior companions in China.

The rising stress from lawmakers comes as Congress steps up scrutiny of US corporations’ enterprise pursuits and investments in China. The House China committee particularly has been taking intention at corporations and has requested the chief executives of three US semiconductor producers — Intel, Nvidia and Micron — to testify earlier than Congress.

US corporations are involved the temperature might rise additional forward of the American presidential election in November.

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