FirstFT: US consultancies lose business in China after national security raids

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Good morning. Work is drying up for top US consultancies in China as Beijing’s national security raids scare away local clients and global investors pull back from dealmaking in the country.

Management consultancy Bain is telling new China hires to wait until as late as 2025 to start their jobs, while roughly half of McKinsey staff do not have paid client projects to work on. Boston Consulting Group’s China team has been holding strategy sessions on how to revive its flagging business, according to half a dozen people close to the firms.

In May, China’s state security services said they were investigating the industry for jeopardising national security after they carried out raids on Bain’s Shanghai office and Capvision, which specialises in connecting management consultants and investors with a network of 450,000 experts.

Without sufficient work for their existing teams, all three top-tier US management consulting firms are delaying start dates for new recruits, leaving the incoming consultants instead to sharpen their skills, gain an extra degree or travel while they wait, the people said.

McKinsey is also struggling to land new projects, with many staff working on proposals or other work that cannot be billed to clients, three people close to the firm said. “Being at McKinsey China feels like being on a sinking ship,” said one junior consultant. Read the full story.

Check out China Focus, the FT’s hub that brings together our best work on Asia’s biggest economy.

Here’s what else I’m keeping tabs on today:

Economic data: France, Germany, Italy, Japan, the UK and US release S&P Global/Cips/HCOB manufacturing and services purchasing managers’ indices. Germany also reports monthly retail sales figures.

US and France in the Pacific: French president Emmanuel Macron and US secretary of state Antony Blinken begin separate trips to the Pacific aimed at bolstering their countries’ Indo-Pacific strategies as the US and China compete for influence in the region. Macron begins his five-day tour with a visit to the French territory of New Caledonia, while Blinken travels to Tonga where he will dedicate a new US embassy this week. (The Guardian and Reuters)

Israel’s political crisis: Lawmakers are due to vote on the first plank of Benjamin Netanyahu’s controversial judicial overhaul, a day after the prime minister was taken to the hospital to have a pacemaker fitted to his heart.

Five more top stories

1. One of India’s best-regarded public policy think-tanks is struggling to continue its work amid an intensifying crackdown by the Modi government on civil society. Authorities stripped the New Delhi-based Centre for Policy Research of its tax-exempt status and permission to raise foreign funds, a move it describes as “a debilitating blow” that “strikes at the core of its ability to function”. Read the full story.

2. Elon Musk has said he plans to revamp Twitter’s branding and ditch its iconic bird logo, posting on the social media platform that “soon we shall bid adieu to the Twitter brand and, gradually, all the birds”. Here’s more on the potential rebrand.

3. A historic cathedral, architectural monuments and residential buildings in Odesa have been severely damaged as Russian forces continued to pound the Ukrainian city with missiles. Kyiv says Moscow’s air strike campaign aims to blockade maritime grain exports from the Black Sea port city and destroy cultural sites.

4. Exclusive: Powerful Republican donors are rethinking plans to support the US presidential bid of Ron DeSantis over concerns that the Florida governor has veered too far to the right. Billionaires Ken Griffin and Nelson Peltz have been discouraged by DeSantis’s interventionist policies, people familiar with their thinking told the FT. Here’s how their cooling attitudes towards DeSantis could harm his campaign.

5. Barbie and Oppenheimer delivered the strongest opening weekend at the box office this year as fans rushed to experience the “Barbenheimer” phenomenon, boosting cinemas after what has been a lacklustre summer season. Read more on the meme-driven buzz that drove fan interest beyond expectations.

The Big Read

In 2017, eight research scientists working at Google published a paper that kick-started an entirely new era of artificial intelligence: the rise of generative AI. Today, their “transformer” model for processing language underpins most cutting-edge applications of AI in development. But all eight researchers have since left the Silicon Valley giant, highlighting how Google’s evolution into a large bureaucratic incumbent has stifled its ability to let entrepreneurialism flourish. Here’s why they left, and what they did next.

We’re also reading . . . 

Israeli democracy under threat: The establishment of a dictatorship in Israel would have grave consequences, writes Yuval Noah Harari.

Tattoos: Most people in your office may now be inked and some are probably earning more than those who are uninked.

China’s jobless youth: The biggest problem for unemployed young people is that the longer they stay out of the formal labour market, the greater the difficulty becomes of ever getting back into it.

Chart of the day

When a discrepancy appeared in China’s latest economic figures, the lack of a detailed explanation from the government illustrated the difficulty in parsing the country’s statistics at a time when the trajectory of its economy is seen as crucial for global growth. “Everyone is asking, ‘Is the Chinese economy stalling?’ It’s not easy to give a waterproof answer to that,” said Louis Kuijs, chief Asia economist at S&P Global.

Take a break from the news

Oppenheimer director Christopher Nolan sits down with Christopher Grimes for Lunch with the FT to discuss streaming, Hollywood strikes — and why his new atomic bomb biopic is a “cautionary tale” in the age of AI.

Additional contributions by Tee Zhuo and Gordon Smith