'Layoff Consulting' McKinsey Also Takes Surgical Approach... Restructuring China Business, 500 Local Employees Laid Off

"Challenges in China Business Amid US Suspicion and Chinese Control"

Global consulting firm McKinsey & Company (McKinsey) has launched a major restructuring of its China operations, including cutting about 500 local employees.

[Image source=Reuters Yonhap News]

On the 17th, the US daily The Wall Street Journal (WSJ) reported that McKinsey has reduced its workforce by about 500 employees, equivalent to one-third of its staff working in the Greater China region, including Hong Kong and Taiwan, over the past two years. McKinsey introduced on its Greater China website last June that it had approximately 1,500 employees in the region.

Sources familiar with the matter told WSJ, "McKinsey's workforce in Greater China has decreased by hundreds over the past two years."

Joe Ngai, head of McKinsey's China division, said, "The company's employee turnover rate in China is at an all-time high of about 20%, but we are slowing down hiring." However, he stated that McKinsey still has more than 1,000 employees in Greater China.

WSJ analyzed that McKinsey's large-scale reduction of its China workforce is due to geopolitical tensions such as the US-China strategic competition and the economic downturn in China, which have caused difficulties not only for McKinsey but also for its clients, Western companies.

Founded in Chicago in 1926 by James O. McKinsey, the company has grown into one of the world's top three management consulting firms. It entered mainland China in 1993.

McKinsey expanded its presence by serving not only Western companies but also local Chinese government agencies and state-owned enterprises, leveraging China's rapid economic growth. It is well known that McKinsey has provided consulting services to major Chinese state-owned enterprises such as China Construction Bank and China Telecom, as well as large insurers like Ping An.

However, as Chinese authorities strengthened surveillance and control through amendments to the Anti-Espionage Law and other measures, combined with unfavorable views from the US political sphere, McKinsey's China business faced greater challenges.

In March last year, Chinese public security authorities conducted forced investigations on the Beijing office of US business intelligence firm Mintz Group, in April on Bain & Company's Shanghai office, and in May on consulting firm Capvision, raising significant concerns among foreign companies.

US lawmakers have criticized McKinsey for consulting on defense-related projects and for working with the Chinese government and affiliated agencies. For this reason, McKinsey Global's Chairman Bob Sternfels was summoned to a US Senate subcommittee hearing in February.

WSJ reported that McKinsey has responded to these criticisms by scaling back projects related to the Chinese government and is also pushing to separate computer systems used for China operations from those used globally.

This is interpreted as a preemptive measure to prevent sensitive information such as semiconductor data from leaking to China through local employees.

Joe Ngai explained, "We have stopped transactions with local Chinese government clients and reduced projects linked to the state," adding, "We will adjust our business focus to support multinational companies adapting to changes in the Chinese market and provide consulting for Chinese companies expanding overseas."

McKinsey is not the only consulting firm facing difficulties in China.

WSJ reported earlier last month that major global companies such as Walmart and Honda are reducing their workforce in China and selling production facilities, either withdrawing from or downsizing their China operations.

This content was produced with the assistance of AI translation services.