(Bloomberg) -- China blocked a senior executive at US risk advisory firm Kroll from leaving the mainland, the Wall Street Journal reported, in the latest case of authorities imposing exit bans on the employees of foreign companies.
Michael Chan, a Hong Kong-based managing director at Kroll, is assisting an investigation into a case that dates back a few years, the Journal said, citing people it didn’t identify. Neither Chan nor the company is the target of the probe, according to the report.
China has imposed exit bans on employees of foreign firms because of investigations before. A senior banker at Nomura Holdings Inc. has been barred from leaving the country in a move connected to a long-running probe of a top dealmaker in the country, the Financial Times reported earlier this month.
The actions have spooked some foreign businesses, highlighting the tensions between Beijing’s increased focus on economic security and its goals of attracting more overseas investment to bolster its own economy and increase its influence abroad.
Foreign firms providing advisory services in China have come under tighter scrutiny this year. Chinese authorities fined US due diligence firm Mintz Group in August for illegal data collection, months after officials raided Mintz’s offices in Beijing and detained five of its Chinese employees.
In April, American consultancy Bain & Co. said Chinese authorities had questioned staff at its Shanghai office. In May, Chinese state security officials visited a branch of Capvision, an expert-research firm with Chinese founders and headquarters in New York and Shanghai.
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Kroll’s Chan traveled to the mainland in July and subsequently informed his employer he couldn’t leave, the Wall Street Journal reported. A Hong Kong passport holder, Chan can move freely in mainland China and is still working, the paper said.
Chinese law prohibits those authorities suspect of crimes from leaving the country. Chinese citizens judged to have endangered national security can also face exit bans under the country’s recently-updated espionage law.
Chan and a representative for Kroll didn’t respond to a request for comment from Bloomberg News. Kroll’s New York office also didn’t immediately respond to a Bloomberg email. China’s foreign ministry also didn’t respond to a query sent on Friday, a holiday in the country.
China’s use of exit bans has been a point of contention between Beijing and Washington. In June, the US State Department advised citizens to reconsider travel to China based on what it called the “arbitrary enforcement of local laws, including in relation to exit bans.”
An academic analysis published in 2022, which analyzed data from six governments, found 128 cases of foreign citizens facing Chinese exit bans, with at least a third of the cases driven by business disputes.
“Even before a court has made a judgment, the staff of companies involved in a lawsuit can be subject to exit bans,” said Jeremy Daum, senior research scholar in law at the Paul Tsai China Center.
People not suspected of being accused of breaking the law can also face measures equivalent to exit bans. “China’s high court has made an interpretation that witnesses who will be required to appear at court for trial may be ‘requested’ to remain in the country,” Daum added.
As foreign investment in China has declined this year, Beijing is increasing efforts to allay business concerns. It has proposed relaxing regulations on transferring data abroad after new data laws sparked widespread anxiety about how multinationals could continue to operate in Asia’s largest economy.
--With assistance from James Mayger and Jacob Gu.
(Adds comment from legal scholar in third-to-last and penultimate paragraphs.)
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