McKinsey under pressure to reassess China operations amid US tensions

McKinsey & Co partners have been questioning the consulting giant’s presence in China, worried that doing business there may not be worth the risks given the Asian superpower’s increasingly volatile relationship with the US.

Some senior partners have been voicing these concerns since late last year, even before Donald Trump was re-elected with a pledge to ratchet up pressure on China, according to people familiar with the matter. The partners argue the lucrative North American business can more than offset a China retreat, some of the people said, declining to be identified as the details are private.

The push to scale back the loss-making China operation is at odds with global managing partner Bob Sternfels, who says the firm needs to maintain its international footprint, which includes offices in around 130 cities across 65 countries.

“Being global is a choice,” Sternfels told staff in a memo late last year that was seen by Bloomberg News. “Frankly, it is the more difficult choice to make. I know this is difficult and may become increasingly so.”

While the memo was not in response to any internal concerns about China, the debate underscores the dilemma facing many high-profile multinational firms caught in the political crosshairs of the world’s two largest economies. Competition for supremacy in everything from computer chips to cars, along with fresh tariffs bring more headwinds for US firms with China operations.

Trump aggressively targeted China during his first term and increased tariffs another 10 per cent this week, prompting retaliatory measures from Beijing. Trump’s Secretary of State, Marco Rubio, has made clear his distaste for the ruling Communist Party, calling for the US to get tougher on China economically and militarily.