U.S. Lawmakers to McKinsey: Cut China Ties or Lose Federal Contracts

Sens. Marco Rubio and Josh Hawley have intensified their calls for McKinsey & Company to terminate its federal contracts following revelations about the consulting firm’s work with the Chinese government. The controversy centers on a 300-page report produced by the McKinsey-led Urban China Initiative (UCI), which allegedly provided strategic advice to the Chinese Communist Party (CCP) on how to enhance its military and industrial capabilities.

Source: Sen. Marco Rubio’s website

The report, first disclosed by the Financial Times, informed China’s 13th Five-Year Plan and its “Made in China 2025” strategy. This plan included recommendations for integrating civilian and military technologies, promoting robotics and autonomous systems, and advancing the nation’s capabilities in various cutting-edge fields such as artificial intelligence and renewable energy.

Rubio and Hawley sent a letter to McKinsey’s Global Managing Partner, Bob Sternfels, demanding transparency regarding the firm’s dealings with China and a complete severance of these ties. They argue that McKinsey’s actions have directly contributed to strengthening China’s military and economic stance against the United States.

“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,” the letter said.

The UCI report strongly advocated for the Chinese government to “vigorously promote” the fusion of military and civilian technologies. This strategy aimed to enhance the capabilities of the People’s Liberation Army (PLA) by integrating commercial research and technology for military purposes.

The report’s recommendations also included strategies for China to achieve technological dominance in fields such as cloud computing, robotics, and artificial intelligence. These advancements could have significant implications for future warfare and national security, potentially tipping the balance of power in favor of China.

Rubio and Hawley also highlighted inconsistencies between McKinsey’s public statements and its documented activities, accusing the firm of making “lawyerly evasions” about its work with the CCP. They pointed out that McKinsey’s assistance to the CCP undermines U.S. interests both economically and militarily.

Consequently, they called for a ban on McKinsey’s federal contracts until the firm fully addresses these concerns and severs all ties with the PRC.

“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,” the senators ended.

McKinsey founded UCI with Columbia University and Tsinghua University in 2011, describing the initiative as a “convener of China’s leading national, provincial and local dialogues on urban issues.” Activities included publishing a sustainable cities index and holding conferences that afforded McKinsey access to officials at multiple levels of government. UCI’s book provided an overview of 14 technologies, from cloud computing to electric vehicles, recommending policies to help China catch up with advanced economies.

In response to these accusations, McKinsey has stated that the UCI was a non-profit initiative and not a McKinsey entity. McKinsey’s global managing partner, Bob Sternfels, testified before Congress, asserting, “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 claims the book for the NDRC “was not authored by McKinsey and is not McKinsey work,” despite the involvement of its senior partners and the use of McKinsey’s research.

The controversy has raised questions about the potential conflict of interest between McKinsey’s work in China and its contracts with the U.S. Department of Defense. Since 2008, McKinsey has earned at least $450 million from the DoD, using dedicated IT infrastructure vetted by the department to protect the confidentiality of its U.S. defense work.

At a recent Senate hearing, Hawley argued that consulting firms like McKinsey should be banned from Pentagon contracts if they work with the Chinese government or state-owned enterprises. “If [McKinsey] is going to advise foreign nations who are hostile to us and make gobs of money off of them, why should you be getting US government contracts?” he questioned.

Michael McCaul, Chair of the House Foreign Affairs Committee, expressed shock over McKinsey’s alleged support for the CCP’s strategic ambitions, stating that such actions compromise American national security and economic interests. Similarly, Mike Gallagher, Chair of the House China Committee, criticized McKinsey for prioritizing profits over ethical considerations, particularly given the CCP’s human rights abuses and geopolitical strategies.

Information for this briefing was found via Financial Times, The New York Times, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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