Global consulting firms are increasingly resorting to unconventional business arrangements in China as geopolitical tensions, Western sanctions and tighter Chinese regulations constrain their traditional operations, according to industry executives and legal experts.
Since 2023, Chinese arms of several leading consultancies have pitched for, or carried out, work involving sanctioned Russian entities or sensitive Chinese state-owned clients, testing the boundaries of both Western sanctions regimes and Beijing’s restrictions on foreign firms.
Sanctioned Russian Bank Engagements Raise Concerns
Documents and sources familiar with internal decisions show that KPMG China undertook work for Russia’s state-owned Sberbank, while Bain & Co’s China unit pitched for a separate project linked to the same lender. These engagements came despite sweeping Western sanctions imposed on Russian financial institutions following Moscow’s 2022 invasion of Ukraine.
KPMG China assisted Sberbank with establishing its China branch, including regulatory approvals, IT assessments and tax filings, for a fee exceeding $400,000, according to an engagement letter reviewed by Reuters. KPMG said the work complied with applicable laws and that payments were made directly by Sberbank’s Beijing representative office.
Sanctions Compliance Carries Heavy Risk
The United States and its allies have imposed primary and secondary sanctions on Sberbank, meaning even non-US firms may face penalties if deemed to have provided “material support” to a sanctioned entity. Legal experts say enforcement decisions often depend on the specific facts of each engagement, leaving companies exposed to regulatory and reputational fallout.
Sanctions specialists warned that even carefully structured transactions can attract scrutiny, particularly if authorities view them as attempts to bypass restrictions. While Bain ultimately did not proceed with its proposed project for Sberbank, discussions included the potential use of an intermediary to handle payments.
China’s Regulatory Clampdown Tightens the Squeeze
Alongside sanctions pressure, foreign consultancies face mounting restrictions from Beijing. In early 2025, China introduced sweeping data-security rules limiting cross-border data transfers and expanding government oversight of firms handling sensitive information.
These measures build on earlier curbs on foreign consulting work for state-owned enterprises, accelerating a shift towards domestic advisory firms and slowing growth for global players such as KPMG, EY, PwC and Deloitte.
Intermediaries Used to Access Restricted Projects
Facing shrinking opportunities, some consultancies have increasingly relied on local intermediaries to access work that might otherwise be restricted or barred. In one case, EY staff in China worked through a third-party firm to pitch for a strategy project at a Chinese state-owned bank, according to contracts reviewed by Reuters.
Although the contract was formally held by the intermediary, the project team consisted largely of EY personnel, including senior partners. Industry sources say such arrangements are not illegal under Chinese law but can be used to shield foreign firms from regulatory scrutiny or internal compliance constraints.
Consulting Firms Walk a Strategic Tightrope
Experts say global consultancies are balancing declining growth in China against rising legal and political risks. As US-China tensions deepen and Western sanctions regimes expand, firms face hard choices about whether to pursue marginal opportunities or retreat from sensitive sectors altogether.
“The environment has left global consultancies walking a tightrope,” said George Yip, emeritus professor at Imperial College London, noting that geopolitical rivalry has reshaped what was once one of the industry’s fastest-growing markets.
with inputs from Reuters
