McKinsey Faces Republican Fury Over Work for China

Plus, what to expect from a second Trump administration

Senator Marco Rubio, a Republican of Florida who gets talked about as a possible Trump vice presidential choice even though Trump also being Florida-based makes that complicated, has a letter to McKinsey Global Managing Partner Bob Sternfels about McKinsey’s work for Communist China. Senator Hawley also signed the letter. Here is the letter:

Dear Mr. Sternfels:

We write once again regarding McKinsey & Company’s work on behalf of the People’s Republic of China (PRC). You have stated, under oath, that “we do no work, and to the best of my knowledge never have, for the Chinese Communist Party or for the central government in China.” McKinsey spokespeople have stated on other occasions that the company’s client service policy forbids work in the PRC “on topics connected to defense, intelligence, justice or police issues.” Public reporting suggests these statements are false. At best, they are lawyerly evasions that fail to grapple with McKinsey’s role in supporting the most powerful adversary of the United States.

The Financial Times reported earlier this year that a McKinsey-led think tank, the Urban China Initiative, produced a report, which our offices possess, to inform the PRC’s 13th Five-Year Plan and “Made in China 2025” industrial strategy. The report, titled, The Trend and Impact of World Technological Revolution and Industrial Transformation, made scores of recommendations to enhance the military and industrial capabilities of the Chinese government. For example, the report urges the Chinese government to “vigorously promote” military-civil fusion, the People’s Liberation Army’s (PLA) strategy of absorbing commercial research and technology for military purposes. The report also contemplates how the PLA can deploy robots and autonomous systems to “improve the success rate of combat operations.” It also schemes about how the PRC can strengthen its national champions in advanced sensors to “eventually take control of the industry from foreign firms”—a takeover that is in progress today. 

While the report was written in the staid language of management consulting, ultimately it was an attempt to help the Chinese Communist Party (CCP) dominate the United States and other countries in cutting-edge fields, including cloud computing, the internet of things, big data, mobile internet, robotics, 3D printing, advanced materials, self-driving vehicles, artificial intelligence, nonconventional oil and gas, electric vehicles, energy storage, renewable energy, and human genomic technology. The implications go beyond economic competition. The report notes that technologies such as these “will have a great impact on future wars and the development of the national defense industry.”

Of course, McKinsey claims that “[t]he Urban China Initiative is not McKinsey, and it did not perform work on McKinsey’s behalf.” Another evasion. McKinsey co-founded the Urban China Initiative. The think tank was based at the same address as McKinsey’s Beijing office. The Urban China Initiative website, which was hosted on a domain owned by McKinsey, directed press inquiries to McKinsey’s Beijing office. McKinsey’s top China hand, Lola Woetzel—who then went by the name “Jonathan”—wrote the foreword to the report. The foreword acknowledges that “McKinsey has compiled the relevant research data and added economic benefit indicators for quantitative screening” for the report. In fact, some passages detail examples in the United States which appear to mirror previous McKinsey reports. Woetzel also hand-delivered the report to the PRC’s second-highest-ranking official at the time, Premier Li Keqiang. McKinsey understandably wishes to disown the Urban China Initiative now that its work for the CCP has come to light, but one has to admit the offspring bears a strong resemblance to the parent.

Of course, the Urban China Initiative is not the only evidence of your firm’s assistance to the CCP. A few of the more notable pieces of evidence include:

• McKinsey has performed work on behalf of State-Owned Enterprises (SOEs) in the PRC, which are the industrial arms of the Chinese government and its representatives in overseas trade. The New York Times claims that McKinsey & Company has worked for “at least 22 of the 100 biggest state-owned companies” in the PRC. McKinsey & Company’s SOE clients reportedly include the China Communications Construction Company (CCCC), which has constructed military outposts for the PLA in the South China Sea, and the China Ocean Shipping Company (COSCO), a key part of the PLA’s naval logistics.

• McKinsey disclosed a commercial relationship with “the Chinese government” in a September 2020 court filing.

•  McKinsey’s official website for its PRC-related work, since scrubbed from the Internet, claimed that McKinsey has “served over 20 different central, provincial, and municipal government agencies on a wide range of economic planning, urban redevelopment, and social sector issues.”

• The PRC and its propaganda organs have credited McKinsey for consulting on various initiatives.

• McKinsey held a corporate retreat in the Xinjiang Uyghur Autonomous Region (XUAR) in 2018, where the government of the CCP is committing genocide against the Uyghurs and other predominantly Muslim ethnic groups.

Your company’s inability to come clean about its dealings with the PRC disqualifies it from future work with the United States government—a government your company has worked to undermine both economically and militarily at the behest of our nation’s primary geopolitical adversary.

We will continue to work to ensure McKinsey does not receive another dollar from the U.S. government until such time as the company owns up to its work on behalf of the Chinese government, severs all ties to the PRC, and commits to patriotic service on behalf of the United States of America.

Sincerely,...

I’m a hawk when it comes to China, which is one reason I’m covering this letter here, but almost more interesting than the China-policy piece of this is the concept of a business’s responsibility piece of it? Republicans have tended to conceive as corporate responsibility mainly as simply making money for shareholders, but here Rubio and Hawley are demanding that McKinsey, a global partnership, commit “to patriotic service on behalf of the United States of America.” McKinsey’s purpose, mission, and values don’t say anything about patriotic service to the United States of America, and plenty of the partners aren’t Americans.

Senator Marco Rubio campaigning for president in New Hampshire, November 2015. Photo by Ira Stoll.

A former chief of staff to Vice President Pence, Nick Ayers, went so far as to suggest a secondary boycott of McKinsey clients: “If you are a US CEO still using @McKinsey next week, you should lose your government contracts, too,” he tweeted. (The incoming head of Harvard’s Board of Overseers, Vivian Hunt, was McKinsey’s managing partner for the United Kingdom and Ireland.)

A former speechwriter for George W. Bush who is a columnist for the Washington Post, Marc Thiessen, tweeted, “This is treason by @McKinsey. Imagine if a U.S. firm had done this for Nazi Germany or the Soviet Union?”

Back in June 2023, when Sequoia Capital announced it would split away its China business, I wrote: “This is an intriguing approach that could set a pattern for other companies. Imagine if Apple, or Tesla, or General Motors, or JPMorgan Chase, split their China businesses off separately, allowing people who want to invest in China to do that, and allowing people who don't want to invest in China a chance to sell, or pass. Let the market put a price on the risk of operating in a Communist Party-run place without strong property rights or rule of law.”

McKinsey itself recently (May 17, 2024) published a piece headlined “Can your company remain global and if so, how?,” observing that, “The reality is many multinationals do not have a choice in instituting some measure of structural segmentation with people; stakeholders ranging from government officials to customers increasingly expect them to do so.” Also, “Multinational companies must be prepared for greater scrutiny of their operating models globally, no matter how thoughtful a segmentation approach they may employ.” The observations seem sound enough; they apply to McKinsey itself just as much as to its clients.

Continetti on What to Expect from Trump II: Matt Continetti writes in the Washington Free Beacon (“Trump’s New New Majority”) about what Trump should do if he “does become president again because a record number of minority voters support the Republican nominee in an ethnic and racial alignment not seen since President Dwight Eisenhower.”:

recognize the novelty of your expanded coalition. Treat newcomers as equals who deserve to be rewarded. Redirect spending toward constituents of your new majority. Use the White House platform to amplify the working-class, patriotic culture of your new voters….

The next president will have two tasks: ending inflation and restoring law and order…

Stable prices will require budget discipline, deregulation, enhanced domestic oil and gas production, reductions in the Federal Reserve's balance sheet, and canceling obligated spending in the Inflation Reduction Act. … A USA-U.K. trade deal might be an option….

…Police departments require more resources to combat crime and need intellectual and legal support to resist activist pressures. The campuses must be taken back from the Hamas sympathizers and their enablers. 

Speaking of the campuses: Somewhat relatedly, the latest episode of Senator Tim Scott’s video series with Black Republican members of Congress focuses on campus antisemitism.

“Fire the president of those universities. Take away their funding,” Senator Scott says. He called for a crackdown on the foreign students who have been prominent among participants in the protests. “If you’re going to shout ‘hate to America,’ we should revoke your visa and send your hindparts home to your country,’” Scott said.

Meanwhile, and also relatedly, the Washington Monthly has an analysis by Marc Novicoff and Robert Kelchen, with elaborate colorful charts, making the case that anti-Israel protesting is what has been called a “luxury belief,” though their article doesn’t use that term: 

Pro-Palestinian protests have been rare at colleges with high percentages of Pell students. Encampments at such colleges have been rarer still. A few outliers exist, such as Cal State Los Angeles, the City College of New York, and Rutgers University–Newark. But in the vast majority of cases, campuses that educate students mostly from working-class backgrounds have not had any protest activity. For example, at the 78 historically Black colleges and universities (HBCUs) on the Monthly’s list, 64 percent of the students, on average, receive Pell Grants. Yet according to our data, none of those institutions have had encampments and only nine have had protests, a significantly lower rate than non-HBCU schools.

Schwarzman backs Trump: Blackstone CEO Stephen Schwarzman, a big donor to Yale and MIT and Tsinghua University who has also done plenty of business in China over the years (he was in Beijing in March), tells Axios he will be backing Trump for “change.”: “The dramatic rise of antisemitism has led me to focus on the consequences of upcoming elections with greater urgency,” he says. “I share the concern of most Americans that our economic, immigration and foreign policies are taking the country in the wrong direction. For these reasons, I am planning to vote for change and support Donald Trump for President. In addition, I will be supporting Republican Senate candidates and other Republicans up and down the ticket.”

The “change” theme is an interesting one. One theory of Trump’s 2016 victory is that Hillary Clinton was the status quo candidate and it was a change election. So Trump’s already won once as the change candidate. In 2024, Biden is the status quo candidate, and if most voters want a change, that could help propel Trump to another victory.

Thank you: At The Editors we are committed to patriotic service on behalf of the United States of America, even without any haranguing from Republican senators, and we don’t do any paid advising to the Chinese Communist Party. We instead are supported by readers like you. So please, if you haven’t done so already, become a paying customer. Thanks to those who already have.

And go ahead, help spread the work by forwarding this to your friend who works at McKinsey, or at a competing firm, or who used to.