At a meeting on Monday with Xi Jinping in Beijing, Senate majority leader Chuck Schumer told the Chinese president that “the United States cannot sit idly by, and that we must address…intimidation of U.S. businesses operating in China,” according to a readout. After the meeting, Schumer, who was traveling with a bipartisan delegation of senators, boarded a plane to continue his Asia tour. 

For some foreign business people, it’s not quite so easy to leave China these days. Instead they are stuck in the country under so-called ‘exit bans’, one form of the intimidation to which Schumer was referring. A string of high-profile bans imposed in recent months — including against executives at U.S. due diligence firm Mintz Group, U.S. risk advisory firm Kroll, and the Japanese bank Nomura – has shaken the already weak confidence among the foreign business community in China.

If the Chinese government is serious about winning back the trust of foreign businesses, it needs to send a signal that, at the very least, it will scale back the use of these tools.

Thomas Kellogg, executive director of Georgetown University’s Center for Asian Law

In the wake of Covid-19, Chinese leaders have repeatedly tried to convey a message that the country is open for business. Li Qiang, the country’s premier, stated this spring that China will “strive to foster a world-class business environment that is market-oriented, law-based, and internationalized.” 

Exit bans, however, send an entirely different message, and have led some foreign business leaders to question whether they are safe in the world’s second largest economy. 

“The government’s use of exit bans will get in the way of efforts by both sides to improve [U.S.-China] ties,” says Thomas Kellogg, executive director of Georgetown University’s Center for Asian Law. “If the Chinese government is serious about winning back the trust of foreign businesses, it needs to send a signal that, at the very least, it will scale back the use of these tools.”

Exit bans are not a new phenomenon in China: foreign business people in contract disputes with Chinese companies have long encountered such prohibitions. In a study published last year, Chris Carr and Jack Wroldsen, professors at the Orfalea College of Business at California Polytechnic State University, identified at least 41 exit bans resulting from business disputes between 2017 and 2020, based on information requests he submitted to six countries. 

A number of more recent cases have been tied to broader probes the Chinese authorities are carrying out into specific industries, like due diligence. Firms such as Bain & Co., Mintz, and Capvision were subject to raids this spring, in the wake of a broad new anti-espionage law, passed in April, which effectively allows the government to prosecute any foreign firm or individual gathering information relevant to Chinese national security for espionage. 

“It means that foreign businesses cannot do any deal at all safely. Everyone who is doing a deal needs information, and that is effectively banned in China,” says Peter Humphrey, a former due diligence specialist in China who was detained for two years on charges of illegally gathering personal information. “Even if a due diligence company does online research, there is still a risk that the findings could be a violation.”

The exit ban imposed on Charles Wang Zhonghe — the Hong Kong-based chairman of China investment banking at Japanese bank Nomura who has been barred from leaving mainland China, according to Financial Times reporting — meanwhile appears linked to a wider financial sector case. Wang previously worked at Industrial & Commercial Bank of China, where he overlapped with Cong Lin, the former president of the investment bank China Renaissance. Cong was detained last year along with his boss, Bao Fan, a top Chinese banker and tech dealmaker. 

Wang’s case, along with the detention in March of an executive at another Japanese firm, Astellas Pharma, on espionage charges has sparked particular worry among the Japanese business community in China. Joerg Wuttke, who was the president of the European Union Chamber of Commerce in China until this year, says that his Japanese colleagues in China currently “seem most concerned” about exit bans. 

Several other experts agree that Chinese nationals and ethnically Chinese individuals are most at risk of exit bans or arbitrary detention in China. This has led to “a rethinking of who can go to China among companies because there seems to be a preponderance of problems for ethnically Chinese [people],” says Craig Allen, the President of the U.S.-China Business Council. 

The current spate of exit bans “is not specifically targeted at foreigners — Chinese nationals are as much ‘victims’ of this,” says Kevin Yam, a senior fellow at the Georgetown Center for Asian Law. “But that is of course cold comfort for foreigners — it really doesn’t matter whether they are specifically being targeted or whether it’s just a generally applicable bad system.”

Even if specific circumstances apply to different exit ban cases, there is increasing concern about foreigners being kept in China as pawns amid broader geopolitical tensions. Two Canadians, Michael Kovrig and Michael Spavor, were detained in China for nearly three years for what many interpreted as retaliation against Canada for arresting Meng Wanzhou, Huawei’s chief financial officer. Cheng Lei, an Australian news anchor, was also held in China on espionage charges after Sino-Australian relations cratered in 2017. Spavor and Kovrig were released in 2021 after Meng was also allowed to return to China, and Cheng was released this week.

Exit bans only add to worries about the climate for foreign businesses. Nearly half of American Chamber of Commerce in China (AmCham) members believe that China’s investment environment is deteriorating, according to AmCham’s 2023 survey, while 51 percent of members reported that they were having trouble finding candidates willing to move to China, up from 30 percent in 2021.

If we lose the bridge of business, we lose maybe the last tether holding the U.S. and China together.

James McGregor, a China-focused business consultant

Lack of data can make it difficult for businesses to assess the risk of exit bans: All of the business people and analysts The Wire spoke with for this article agreed that there are likely many more ongoing cases than is publicly known. California Polytechnic’s Carr says the U.S. State Department could help by publishing more data on the frequency of such cases. 

“More information coming from the federal government to the business community would be really helpful to business people in asking the question: do I go to China or do I do my China meetings on zoom?” he says. 

In June, the State Department updated its risk advisory for China “due to the arbitrary enforcement of local laws, including in relation to exit bans, and the risk of wrongful detentions.” The department did not respond to requests for comment.

Dan Harris, an attorney at Harris Sliwoski who helps foreign businesses operate in China, says his law firm has conducted more risk assessments for clients traveling to China this year than ever before. Its evaluations include questions about whether companies have any ongoing business disputes in China, or whether individuals have family members in business disputes in China. 

Harris says that the deteriorating state of the Chinese economy only adds to the likelihood of business disputes with Chinese companies, which raises the chances of related exit bans.

“People are very worried,” he says. 

But for James McGregor, a China-focused business consultant who lived in China for three decades and moved back to the U.S. during Covid, visiting China is still worth the risk. He departed this week for a month-long trip to China, and says it’s important for the overall U.S.-China relationship for business people like him to keep going. 

“Business has always been considered the strongest bridge between the U.S. and China — to bring mutual understanding and an environment where everyone can be successful. But in some cases, it has turned from being the bridge to the battleground, especially in technology,” he says. “If we lose the bridge of business, we lose maybe the last tether holding the U.S. and China together.”

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