The House Select Committee on the Chinese Communist Party despatched letters to 4 separate U.S. venture capital firms, together with Qualcomm’s venture arm, expressing “severe concern” about their investments in Chinese tech startups.
The letters, which had been made public on Wednesday, had been despatched to GGV Capital, GST Ventures, Qualcomm Ventures, and Walden International. They had been written by and Wisconsin Republican Mike Gallagher and Illinois Democrat Raja Krishnamoorthi, the highest two members on the committee.
Of specific concern to the lawmakers are investments in synthetic intelligence, chipmakers and quantum computing corporations in China. They additionally famous that a number of the corporations to obtain U.S. cash have been linked to the profiling and monitoring of Uyghur ethnic minorities in China.
“Like AI, the home growth of semiconductors is a high precedence of the Chinese Communist Party,” the letter says. “Semiconductors are important for synthetic intelligence, quantum computing, and different superior twin use know-how.”
Representatives from the 4 venture firms who acquired the letters didn’t instantly reply to requests for remark.
The outreach represents the newest bipartisan effort by politicians to step up strain on U.S. investments in China as stress swells between the world’s two largest economies and nationwide safety considerations escalate. U.S. Treasury Secretary Janet Yellen traveled to China earlier this month as a part of a plan to stabilize relations with China. Secretary of State Antony Blinken visited in June.
In their letter, Gallagher and Krishnamoorthi linked dozens of specific investments to human rights violations and efforts to reinforce China’s army, which runs counter to American pursuits.
Qualcomm Ventures, for instance, made 13 investments in Chinese A.I. corporations from 2015 to 2021, in accordance with the letter. One funding, in the now publicly-traded SenseTime, was linked by a New York Times report to Chinese monitoring and profiling of the Uyghurs.
In addition to Qualcomm, PitchBook information exhibits that U.S. firms Tiger Global Management and Silver Lake, which weren’t talked about in the letter, invested in SenseTime previous to its 2021 IPO.
Tiger Global didn’t instantly return a request for remark.
Qualcomm’s funding in Denglin Technology, an obvious competitor, additionally faces Congressional scrutiny. Qualcomm was one in all Denglin’s earliest backers, in accordance with PitchBook, and invested in a further 2022 funding spherical.
The agency with probably the most probably problematic investments, in accordance with the letter is GGV Capital, which has workplaces in Silicon Valley, San Francisco, Shanghai, Beijing and Singapore. The letter recognized 43 totally different investments in Chinese AI corporations from 2015 to 2021, greater than another recognized by impartial researchers at Georgetown’s Center for Security and Emerging Technology.
GGV has $9.2 billion in belongings underneath administration, and established operations on the bottom in China in 2005. Even earlier than that, it invested in Chinese e-commerce large Alibaba, and subsequently backed TikTok dad or mum ByteDance and ride-hailing firm Didi.
Gallagher and Krishnamoorthi determine GGV’s funding in Megvii, a Beijing-based facial recognition software program supplier, as some extent of concern. The firm “actively helps the surveillance of Uyghurs,” the letter says.
Megvii is backed by numerous main traders, together with Alibaba, Foxconn and the Macquarie Group. GGV invested in Megvii in 2019 alongside Abu Dhabi’s sovereign wealth fund in a deal that valued the corporate at about $4 billion.
Walden, a smaller agency, was recognized as a very important backer of Chinese AI corporations. The letter stated that from 2015 to 2021, at least 39% of the agency’s AI offers had been in that sector, together with one funding in a now blacklisted firm known as Intellifusion.
Intellifusion has since gone public and has a market cap of twenty-two billion Chinese yuan, or roughly $3 billion.
Regarding GSR Ventures, the letter stated the agency “was among the many high U.S.-located traders in PRC synthetic intelligence corporations between 2015 and 2021, in accordance with a current report by the Center for Security and Emerging Technology.” The lawmakers cited 33 distinct investments in the six-year interval, together with Horizon Robotics, which was final privately valued at $5 billion in 2021.
The letters advance Gallagher’s push for controls on U.S. cash in key applied sciences in China.
After assembly with Silicon Valley executives in April, Gallagher told CNBC in an interview that he “emerged from that day cautiously optimistic that we may put in place some wise controls on American capital flowing to China that may permit us to not fund our personal destruction or fund our personal loss in the nice AI race.”
He stated at the time he discovered there was “broad help” amongst venture capitalists and others to maintain U.S. asset managers from investing in Chinese AI firms.
The U.S. Commerce Department has also considered steps to make sure U.S. applied sciences cannot be overly leveraged by China to advance its personal AI efforts. The Wall Street Journal reported final month that the company was weighing additional limits on superior chips used for AI that could possibly be exported to China.
Pressure has been constructing on VC firms with substantial investments in China, in half because of considerations over mental property theft inside know-how and a budding AI race. Last month, legendary VC agency Sequoia Capital stated it could split its international business into three elements, with Neil Shen helming its highly effective Sequoia China unit.
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