McKinsey & Company has reportedly instructed its China operations to cease consultancy work related to generative artificial intelligence (AI), effectively sidelining itself from one of the fastest-growing and potentially most lucrative markets for AI consulting in the country, according to sources cited by the Financial Times.
The decision, made in recent months, comes amid increasing scrutiny from the U.S. government over American firms’ involvement in sensitive technologies such as AI and quantum computing within China. While McKinsey’s China business can still advise clients using established AI technologies, the ban specifically targets projects involving generative AI, such as chatbots and other advanced applications increasingly central to corporate strategy.
One insider told the Financial Times that this cautious stance could limit McKinsey’s ability to win new business, given the growing importance of generative AI in IT systems and digital transformation.
McKinsey has faced congressional criticism in the past over its work with Chinese state-owned enterprises and local governments, despite simultaneously holding contracts with the U.S. Department of Defense. Bob Sternfels, McKinsey’s global managing partner, was questioned by Congress last year regarding the firm’s ties to China.
Although no explicit U.S. ban currently forbids consultancies from advising on AI in China, Washington has implemented export controls on advanced semiconductor chips and restricted American investments in Chinese tech companies as part of efforts to curb China’s AI development.
McKinsey’s approach contrasts with some competitors, who continue AI-related work in China while avoiding clients blacklisted by U.S. authorities, according to a consultant at a rival firm.
The move also coincides with a broader trend of retrenchment by foreign professional services firms—including consultancies, law firms, and investment banks—in China, driven by geopolitical tensions and a slowing economy. Many multinational companies are reducing investments or exiting the market, while Chinese firms increasingly turn to more affordable domestic alternatives.
Reflecting this shift, McKinsey has reduced its headcount in mainland China, Hong Kong, and Taiwan from around 1,500 employees in 2023 to approximately 1,000, per its website.
Despite the pullback in China, McKinsey remains a global leader in AI transformation. The firm has launched internal AI tools—such as chatbots to assist consultants with proposal writing and presentations—and continues to develop AI solutions through its QuantumBlack unit, which builds systems based on large language models.
In response to inquiries about the policy, McKinsey stated: “Last year, we further strengthened our client service policies in China, where today our work focuses on multinational and Chinese private sector firms. We follow the most rigorous client selection policy in our profession, and we continue to evolve and strengthen our approach.”
