Advising both Chinese state companies and the Pentagon, McKinsey & Co. comes under scrutiny

In a 2020 federal court filing related to McKinsey’s advisory role in a bankruptcy case, the firm cited its connection to COSCO. That same year, the shipping company said in a press release that it had received advice from McKinsey.

As part of China’s “Belt and Road Initiative,” COSCO has been pouring Chinese government money into ports around the world and other logistics hubs. COSCO in recent years has bought a majority stake in the Greek port of Piraeus, invested in a new container terminal in the United Arab Emirates, and purchased a major stake in the Peruvian port of Chancay.

COSCO is among a core of state-owned enterprises that are part of the country’s defense industrial base and are given special status by the ruling Chinese Communist Party, according to regional analysts. The company has provided logistical support to the Chinese navy’s escort operations in the Gulf of Aden and experts say it serves as the maritime logistical arm for the People’s Liberation Army (PLA).

Meanwhile, McKinsey advised the U.S. Navy on plans to modernize its network of naval shipyards.

McKinsey, which set up business in China in the 1990s, says on its website it employs more than 1,000 people at six offices across the country and has carried out more than 1,500 “engagements” with Chinese clients in the past five years.

According to McKinsey, the firm’s work in China is carried out through a separate legal entity and most of its consulting does not involve state-owned enterprises (SOEs).

“The vast majority of that work is for the private sector, including with U.S. and other multinational companies. Our limited work with SOEs focuses on the same core commercial and operational topics on which we serve other major corporations,” Grace, the company spokesperson, said.

The company declined to discuss its work with specific Chinese clients, including those that appear on U.S. government blacklists.

Grace said McKinsey follows an extensive internal policy to evaluate potential clients and does not serve political parties anywhere in the world or defense, intelligence, justice or policing institutions in countries with low rankings on the Economist Intelligence Unit’s Democracy…