GEG Concerned About Growing Chinese Debate Regarding Consultants

By Abel M. Mateus on August 15, 2014

As outlined in three recent media stories, GEG has been mentioned in a growing debate in China regarding consultants’ roles. The debate erupted when China’s State Council dismissed Zhang Xinzhu, a researcher at the Institute of Quantitative & Technical Economics at the Chinese Academy of Social Sciences, from its antitrust advisory panel after learning that he worked on a report advising Qualcomm on pricing and business strategies. Qualcomm is under investigation in China for alleged monopoly power and is a GEG client.

The Wall Street Journal in its article, Qualcomm Case in China Sparks Debate Over Conflicts of Interest, explains GEG’s involvement and includes Chairman David Evans’ response:

Global Economics Chairman David Evans said Mr. Zhang was a longtime colleague and a highly regarded member of the firm engaged to work on behalf of Qualcomm. He said Mr. Zhang wasn’t employed by Chinese regulators or involved on their behalf in connection with Qualcomm but was someone they could turn to for advice if they chose.

“As far as I know, there is no conflict of interest,” Mr. Evans said. “There is nothing that prevents him from working for private clients.”

The story has been picked up in other media, including an article in Caixin, Fired Gov’t Advisor Denies Taking 6 Mln Yuan from Qualcomm, as well as the New York Times, Adviser to Government in Chinese Investigation of Qualcomm Is Ousted. The common thread in all the stories is that the rules are, at best, murky. There are no specific rules preventing members of the advisory group from providing consulting services to companies while a member of the advisory group and apparently committee members frequently are also lawyers or academics who write industry or corporate papers and provide consulting services.

China has been revving up its antimonopoly activities recently, particularly against foreign companies”Qualcomm is just one of several companies, including General Motors and Microsoft, under investigation.