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By Julie Zhu
HONG KONG (Reuters) - CICC Capital, a unit of leading Chinese investment bank CICC, has stopped using Capvision Partners' services, three sources said, following an investigation into the "expert network" as part of Beijing's crackdown on national security.
Shanghai-based Capvision is the latest consultancy and due diligence firm to get caught in Beijing's sweeping crackdown on what state media describes as "intensifying" law enforcement push around sensitive corporate information.
In an internal memo issued on Tuesday, which was confirmed by sources with direct knowledge, CICC Capital's research division said it would ban all its teams from using Capvision for due diligence-related expert calls and inquiries.
The move by the flagship alternative investment arm of state-owned behemoth China International Capital Corp (CICC) comes with financial sector participants eager to understand if Beijing would expand its scrutiny into consultancies and their clients.
Those concerns have been partially fuelled by Chinese lawmakers passing a sweeping update to anti-espionage legislation last month, banning the transfer of any information related to national security and broadening the definition of spying.
CICC Capital's ban on Capvision will come into immediate effect, the memo said, adding its teams should also review previous dealings with Capvision. Its parent CICC was one of the underwriters for Capvision's aborted Hong Kong IPO last year.
CICC Capital's investment teams have also been barred from using Capvision for such expert calls or inquiries, said the sources, who declined to be identified as they were not authorised to speak to the media.
CICC Capital can still use other consulting firms for such practices, said two of the sources.
CICC, which handles media queries for the investment unit, declined to comment. Capvision did not respond to Reuters request for comment.
CICC Capital manages private equity funds and fund of funds and had 360 billion yuan ($52 billion) of assets under management as of the end-2022, according to the parent's website and 2022 annual report.
BEEFED UP SECURITY LAWS
Chinese police raided Capvision offices over what state media this week reported were national security issues.
Capvision, which runs China's largest expert network group and has offices in eight cities around the world, was singled out in a series of news reports including a 15 minute segment by state broadcaster CCTV on Monday.
The CCTV report said Capvision had accepted projects from overseas companies to source information, including "state secrets and intelligence" on sensitive sectors including defence and advanced technology.