McKinsey Bars China Division from Generative AI Projects Amid US-China Tensions

McKinsey has barred Chinese business from advising on generative AI projects, according to a report by Reuters. The global consulting firm has reportedly instructed its China operations to stay away from any work involving generative AI, signaling a major shift in its internal policies tied to global AI tensions.

This move highlights growing concerns about McKinsey’s service policies in China, especially as the US tightens controls around AI exports and sensitive tech collaboration with China.

Internal Instruction Limits AI Scope

McKinsey instructed Chinese branch leaders not to engage in consulting services related to generative AI. That includes everything from developing AI strategies to helping companies deploy models or evaluate tools like ChatGPT or similar systems.

The spokesperson said, “We follow the most rigorous client selection policy in our profession, and we continue to evolve and strengthen our approach.”

The new policy is said to be part of a broader strategy to ensure compliance with US regulations and to avoid potential backlash from government agencies or international clients.

This means McKinsey’s China business will have to focus on more traditional areas of consulting like operations, finance, and organizational restructuring, while leaving out one of the fastest-growing areas in global tech advisory work.

Why Generative AI Is Off Limits?

Generative AI tools like OpenAI’s GPT-4 and Google’s Gemini are changing how businesses operate, automate, and make decisions. For consulting firms like McKinsey, this has created new service lines focused on digital transformation and advanced analytics.

But McKinsey’s generative AI ban in China makes it clear the firm is not willing to take chances when it comes to compliance and geopolitics. Sources say McKinsey’s global leadership is especially cautious due to ongoing scrutiny over how Western companies interact with Chinese tech ecosystems.

The US government has already placed export restrictions on high-end semiconductors and cloud-based AI services. These restrictions are intended to prevent innovative AI capabilities from being developed or enhanced in countries deemed as strategic competitors.

A Cautious Global Play

With McKinsey barring its China business now being an official policy, local competitors may step in to fill that gap. Chinese firms like iFlytek and SenseTime are pushing ahead with their generative AI platforms and may look to local consultancies for support and strategy.

The ban will apply to projects involving offices of multinational clients, but McKinsey’s China business can collaborate with companies using more traditional forms of AI. The report comes amid rising tensions between Washington and Beijing, with China recently placing exit bans on certain US citizens traveling to the country.