Where did China get the idea to dominate specific sectors of the tech industry by pushing out US competitors? The plan, known as "Made in China 2025," was at least partly inspired by a 300-page book written for them by McKinsey and Company, an American strategy and management consulting firm. 

The Financial Times was the first to report on McKinsey's contribution to China's 13th five-year plan back in February.

A McKinsey-led think-tank advised China to deepen co-operation between business and the military and push foreign companies out of sensitive industries as part of a project for the central government in 2015.

The recommendations in a book by the Urban China Initiative, commissioned by the Chinese government’s central planning agency, were among dozens of policies it proposed to boost the country’s technological prowess, according to a review of the work, which has not previously been reported in western media.

The UCI’s book — with a foreword by one of McKinsey’s most senior partners in China and drawing on work by McKinsey’s in-house research arm — formed part of the Chinese government’s research for its 13th Five-Year Plan covering 2016-20. The Five-Year Plan included the “Made in China 2025” policy that increased tensions between Beijing and Washington.

McKinsey's global managing partner gave congressional testimony in February during which he claimed, "We do no work, and to the best of my knowledge never have, for the Chinese Communist party or for the central government in China." He further claimed that the Urban China Initiative was "not McKinsey" and had been founded by Columbia University and Tsinghua University. But the Financial Times reports McKinsey was a lot more involved than that.

UCI has been described by several people involved as a McKinsey initiative. One said it was initiated and run by McKinsey, rather than Columbia or Tsinghua. UCI’s director of research Gengtian Zhang, described the organisation as “McKinsey (Shanghai) Consulting’s Urban China Initiative” in a biography in the annual report of a company where he is a director. Other former UCI staff members list themselves as having worked for McKinsey on their LinkedIn profiles. The initiative shared an address with the McKinsey office in Beijing.

The UCI’s 310-page book for the NDRC, called Scientific and Technological Revolutions around the World, contained a foreword by McKinsey’s Shanghai-based senior partner Lola Woetzel, who founded UCI in 2011 and co-chaired the initiative. She presented a personalised copy of the work to China’s then premier Li Keqiang at an NDRC symposium in December 2015.

The UCI was shut down in 2021 and McKinsey clearly wants to walk away from it and the work it did for China. Still, the main point here is that this 300-page book was advising China to do things like invest in cloud computing so it wouldn't have to worry about foreign countries having access to its data. This is something that China has recently become obsessive about. It also advised China to invest more in "robotics...aerospace and new energy vehicles." China followed their advice but the advancements to be had in these fields were already being made in the US. 

What we know for certain is that China amplified its efforts to steal US technology and intellectual property. A 2018 report found that these tech transfers were costing the US economy as much as $600 billion per year, In response, President Trump set tariffs on Chinese tech and put in place restrictions on the use of Chinese tech in the US. And it's fair to say the US-China relationship has never really recovered.

Meanwhile, even as it was helping China write its five-year plans, it was also making hundreds of millions on US government contracts, including for the Pentagon. Now Sens. Marco Rubio and Josh Hawley are suggesting McKinsey should receive no more government contracts until it comes clean about its work for the PRC. Here's a portion of the letter the Senators sent McKinsey this week.

We write once again regarding McKinsey & Company’s work on behalf of the People’s Republic of China (PRC). You have stated, under oath, that “we do no work, and to the best of my knowledge never have, for the Chinese Communist Party or for the central government in China.” McKinsey spokespeople have stated on other occasions that the company’s client service policy forbids work in the PRC “on topics connected to defense, intelligence, justice or police issues.” Public reporting suggests these statements are false. At best, they are lawyerly evasions that fail to grapple with McKinsey’s role in supporting the most powerful adversary of the United States...

While [McKinsey's] report was written in the staid language of management consulting, ultimately it was an attempt to help the Chinese Communist Party (CCP) dominate the United States and other countries in cutting-edge fields, including cloud computing, the internet of things, big data, mobile internet, robotics, 3D printing, advanced materials, self-driving vehicles, artificial intelligence, nonconventional oil and gas, electric vehicles, energy storage, renewable energy, and human genomic technology. The implications go beyond economic competition. The report notes that technologies such as these “will have a great impact on future wars and the development of the national defense industry.”...

Your company’s inability to come clean about its dealings with the PRC disqualifies it from future work with the United States government—a government your company has worked to undermine both economically and militarily at the behest of our nation’s primary geopolitical adversary.

We will continue to work to ensure McKinsey does not receive another dollar from the U.S. government until such time as the company owns up to its work on behalf of the Chinese government, severs all ties to the PRC, and commits to patriotic service on behalf of the United States of America.

Patriotic service to the USA sounds reasonable if McKinsey is going to keep raking in money from the Pentagon. We definitely don't need consultants who are working part time for our adversaries and then rushing back to the US to advise us on how to defeat China's growing military.

This is not the only work that has gotten McKinsey in trouble lately. As I described here, McKinsey's research is also the source of the claim that companies that implement DEI policies make more money. They are quite literally propping up corporate DEI policies with what appears to be shoddy research. And let's not forget their involvement in the opioid crisis.

McKinsey faced criminal charges in South Africa in a government corruption scandal, and it is still working through the legal fallout from advising US drug manufacturers on how to “turbocharge” opioid sales, which led to claims that the firm had contributed to the country’s epidemic of addiction. Settlements over that have totalled more than $900mn since 2021.

Whose side is McKinsey on? No one's, it seems. Or perhaps anyone's side, if they can pay. If that's how they want to operate, they should do so without anymore government contracts.