China's state-owned sector told to cut ties with U.S. consulting firms

Mon May 26, 2014 8:52am IST

A combination photo shows five Chinese military officers who the U.S. has accused of cyber espionage. Top row: Sun Kailiang (L), Huang Zhenyu (R), bottom row L-R: Wen Xinyu, Wang Dong and Gu Chunhui in FBI released photos. REUTERS/FBI/Handout via Reuters

A combination photo shows five Chinese military officers who the U.S. has accused of cyber espionage. Top row: Sun Kailiang (L), Huang Zhenyu (R), bottom row L-R: Wen Xinyu, Wang Dong and Gu Chunhui in FBI released photos.

Credit: Reuters/FBI/Handout via Reuters

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REUTERS - China has told its state-owned enterprises to sever links with American consulting firms just days after the United States charged five Chinese military officers with hacking U.S. companies, the Financial Times reported on Sunday.

China's action, which targets companies like McKinsey & Company and The Boston Consulting Group (BCG), stems from fears the firms are providing trade secrets to the U.S. government, the FT reported, citing unnamed sources close to senior Chinese leaders.

"We haven't received any notification of this kind," said Margaret Kashmir, a spokeswoman for Strategy& - formerly Booz & Company - in an email, adding that serving clients in China and globally continues to be the company's main priority.

"We are unaware of any government mandates," added Bain & Company spokeswoman Cheryl Krauss.

A McKinsey spokeswoman did not return a call seeking comment. A spokeswoman for BCG was not immediately able to comment.

The companies have large operations in China, the FT reported. McKinsey, BCG and Strategy& all have Chinese state enterprises as clients, the newspaper said.

China warned this week it would retaliate if Washington pressed ahead with allegations that the Chinese officers hacked into U.S. nuclear, metal and solar companies, including Alcoa Inc, Allegheny Technologies Inc, United States Steel Corp, Toshiba Corp unit Westinghouse Electric Co, the U.S. subsidiaries of SolarWorld AG and a steelworkers' union.

Officials in Washington have argued for years that cyber espionage is a top national security concern.

The May 19 indictment was the first criminal hacking charge the United States has filed against specific foreign officials. It follows a steady increase in public criticism and private confrontation, including at a summit last year between U.S. President Barack Obama and Chinese President Xi Jinping.

In the wake of the charges, Chinese media labeled the U.S. government a "high-level hooligan," while officials in Beijing accused Washington of "double standards" on issues of cyber spying.

China also said it would investigate providers of IT products and services to guard "national security," and "economic and social development." It also banned new central government computers from using Windows 8, Microsoft Corp's latest operating system.

(Reporting by Hilary Russ in New York; editing by Paul Simao and G Crosse)

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