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The CPC House Selection Committee has sent letters to four separate US venture capital firms, including Qualcomm risk arm, expressing “serious concerns” about their investments in Chinese tech startups.
The letters, which were announced on Wednesday, were sent to GGV Capital, GST Ventures, Qualcomm Ventures and Walden International. They were written by Wisconsin Republican Mike Gallagher and Illinois Democrat Raja Krishnamurthy, the two senior members of the committee.
Of particular concern to lawmakers are investments in China’s artificial intelligence, chip makers and quantum computing companies. They also noted that some companies that receive US money have been linked to the profiling and tracking of ethnic Uyghur minorities in China.
“Like artificial intelligence, the domestic development of semiconductors is a top priority for the Chinese Communist Party,” the letter says. “Semiconductors are essential to artificial intelligence, quantum computing, and other advanced dual-use technologies.”
Representatives of the four venture firms who received the letters did not immediately respond to requests for comment.
The outreach marks the latest effort by politicians from both parties to ramp up pressure on US investment in China as tensions between the world’s two largest economies mount and national security concerns mount. US Treasury Secretary Janet Yellen traveled to China earlier this month as part of a plan to stabilize relations with China. Secretary of State Antony Blinken visited in June.
In their letter, Gallagher and Krishnamurthy link dozens of private investments to human rights abuses and efforts to strengthen the Chinese military, which runs counter to American interests.
For example, Qualcomm Ventures made 13 investments in Chinese AI companies from 2015 to 2021, according to the letter. One of the investments, in the publicly traded SenseTime, was linked by the New York Times a report to Chinese tracking and Uyghur profiling.
In addition to Qualcomm, PitchBook data shows that US companies Tiger Global Management and Silver Lake, which are not mentioned in the letter, have also invested in SenseTime ahead of the 2021 IPO.
Tiger Global did not immediately respond to a request for comment.
Qualcomm’s investment in Denglin Technology, an obvious competitor, is also facing scrutiny from Congress. Qualcomm was one of Denglin’s early backers, according to PitchBook, and has invested in an additional financing round for 2022.
According to the letter, the company with potentially more problematic investments is GGV Capital, which has offices in Silicon Valley, San Francisco, Shanghai, Beijing and Singapore. The letter identified 43 different investments in Chinese AI companies from 2015 to 2021, more than any other identified by independent researchers at the Georgetown Center for Security and Emerging Technology.
GGV has $9.2 billion in assets under management and set up operations on the ground in China in 2005. Even before that, it invested in Chinese e-commerce giant Alibaba, and later backed TikTok parent ByteDance and Didi.
Gallagher and Krishnamurthy view GGV’s investment in Megvii, a Beijing-based facial recognition software provider, as a point of concern. The letter said the company “actively supports the surveillance of Uyghurs”.
Megvii is backed by a number of major investors, including Alibaba, Foxconn and Macquarie Group. GGV invested in Megvii in 2019 along with Abu Dhabi’s sovereign wealth fund in a deal that valued the company at nearly $4 billion.
Walden, a smaller company, has been identified as a particularly important supporter of Chinese AI companies. The letter said that from 2015 to 2021, at least 39% of the company’s AI deals were in this sector, including one investment in a now-blacklisted company called Intellifusion.
Since then, Intellifusion has gone public and has a market capitalization of CNY22 billion, or roughly $3 billion.
Regarding GSR Ventures, the letter said the company “was among the largest US-based investors in AI companies in the People’s Republic of China between 2015 and 2021, according to a recent report by the Center for Security and Emerging Technology.” The lawmakers cited 33 distinct investments in the six-year period, including Horizon Robotics, which was recently valued at $5 billion in 2021.
The letters advance Gallagher’s push for controls on US funds in key technologies in China.
After meeting with Silicon Valley executives in April, Gallagher told CNBC in an interview that he “came away from that day cautiously optimistic that we could put some reasonable controls on the flow of American capital into China that would allow us not to fund our own destruction or fund Our loss in the great AI race.”
He said at the time that he found there was “broad support” among venture capitalists and others to prevent US asset managers from investing in Chinese AI firms.
The US Commerce Department has also considered steps to ensure that China does not make excessive use of US technologies to enhance its AI efforts. The Wall Street Journal It reported last month that the agency was considering additional restrictions on advanced chips used in artificial intelligence that could be exported to China.
Pressure is mounting on venture capital firms with large investments in China, in part due to concerns about intellectual property theft within the technology and the emerging artificial intelligence race. Legendary Sequoia Capital said last month It will split its international business into three parts, with Neil Shen directing the powerful Sequoia China unit.
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