The firms benefiting from this new demand are mostly involved in riskconsultancy work, which relates to providing advice on protecting people and assets in high-risk environments such as conflict-torn Afghanistan or even dealing with kidnappers. Now, private equity firms and hedge funds are beating a path to their doors, seeking information about Chinese businesses and the individuals behind them.

 

Specifically, their new clients might want unbiased, third-party investigators to carry out due diligence on potential partners. Or, they want to determine whether assets that companies claim to own actually exist. Sometimes, they just want a background check on a personality they might be about to do a transaction with. Or, in the case of a post-transaction problem, investigate a fraudulent or corrupt practice.

 

Among the firms benefiting from this new business is Control Risks. “We’re growing by leaps and bounds,” says Kent Kedl, its managing director for Greater China and North Asia. The specialist risk consultancy is seeing a spike in demand for business intelligence in China, following cases in which investors have discovered that assets — from forest concessions to cold hard cash — have been overstated or even conjured up.

 

In fact, demand is growing so fast that Kedl is struggling to find suitable hands to handle the new work rolling in. “We can’t hire fast enough,” he says. Control Risks has about 60 people in the region, drawn from a mix of backgrounds, often the legal and financial services sectors. There is also a good number of ex-investigative reporters and forensic IT experts within their ranks. And, they all need to be effectively bilingual, as they are expected to go out and talk to Chinese companies’ suppliers, customers, former employees and competitors.

 

Kedl himself has a background in M&A advisory, was once a journalist and has lived and worked in China and Asia for 25 years. That gives him an edge in understanding what clients such as private-equity firms, investment banks and hedge funds want, as well as getting them what they need from the confusing and opaque market that is China.

 

According to Kedl, a key driver for business intelligence is the steady flow of foreign investment into China. That’s especially so, now that investment in China is moving out of the bigger cities and into second- and third-tier cities, which foreigners are less familiar with. Moreover, MNCs are becoming more proactive about due diligence and compliance. This has been spurred to some extent by the introduction of new laws such as the UK Bribery Act, which became effective on July 1; and the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in the US last year.