Multiple members of Congress are urging the Biden administration to investigate McKinsey & Company’s connections with China, claiming that the consulting giant has failed to disclose its business relationships with the Chinese government, potentially violating U.S. federal law. Recently, several Republican lawmakers sent a letter to Attorney General Merrick Garland and Defense Secretary Lloyd Austin, calling for an inquiry into whether McKinsey’s operations in China pose a threat to U.S. national security. They expressed concerns about potential conflicts of interest between McKinsey’s work in China and the Department of Defense, which could be in violation of U.S. law.

According to Reuters, the letter, signed by Republican Senators Marco Rubio and Joni Ernst, along with Representative John Moolenaar, chair of the House Select Committee on the Chinese Communist Party, questioned McKinsey’s process in securing a $480 million consulting contract with the Pentagon. The lawmakers allege that McKinsey concealed its close ties with the Chinese government and state-owned enterprises, thereby endangering U.S. national security.

In their letter, the officials stated, “Our review of existing documents from the Department of Defense indicates that in numerous instances McKinsey failed to disclose its collaborations with the Chinese government when obtaining contracts.” They further asserted that “McKinsey’s activities pose a serious risk to U.S. national security and may not fulfill their obligations under federal law.” They highlighted the firm’s close relationships with Chinese government entities and noted how its business operations benefit the Chinese military and economy.

As of now, McKinsey has not responded to these allegations. During a Congressional hearing, a company executive stated that its operations in China are exclusively with multinational companies and private firms, and do not involve state-owned enterprises or government entities, asserting that they adhere to the strictest industry standards.

Additionally, the Wall Street Journal reported on October 16 that McKinsey is restructuring its business in China. The firm has reportedly reduced its clients linked to the government and laid off about 500 employees, which constitutes around one-third of its workforce in China.

Sources indicate that McKinsey has been working to separate its Chinese operations from its global business to mitigate risks associated with operating in China. Over the past two years, McKinsey has cut hundreds of jobs in the Greater China region, including employees in Hong Kong and Taiwan. As of June 2023, McKinsey’s website indicated that it employed nearly 1,500 people in the Greater China region.