A bipartisan congressional investigation has revealed significant US venture capital investments in Chinese technology companies, particularly in sectors deemed threatening to US national security. The report, released by the House Select Committee on China, highlights investments from prominent firms like GGV Capital, GSR Ventures, Qualcomm Ventures, Sequoia Capital, and Walden International. These investments, totaling billions of dollars, were made in companies directly or indirectly supporting Beijing’s military and surveillance activities, with over $1.9 billion directed towards AI companies involved in China’s human rights abuses or military efforts, and an additional $1.2 billion in the semiconductor sector aiding the Chinese Communist Party’s military ambitions.
The congressional report emphasizes the urgency for Congress to enact restrictions on US investments in Chinese entities flagged for connections to the People’s Liberation Army (PLA), forced labor, or genocide. Furthermore, the committee recommends implementing additional outbound investment restrictions targeting critical and emerging technologies, military capabilities, and human rights violations linked to the People’s Republic of China (PRC). Lawmakers assert that the current situation is unsustainable, highlighting the need for regulatory measures to safeguard US national security interests.
Specific examples in the cybersecurity sector, such as Sequoia Capital’s investment in Qihoo360 and EverSec, underscore the extent of US venture capital involvement in supporting entities aligned with China’s military and surveillance apparatus. EverSec, for instance, is identified as a cybersecurity entity contracted by the PLA, raising concerns over the potential exploitation of US investments to bolster China’s military capabilities. Similarly, Qualcomm Ventures’ investment in SinoITS, a company with ties to Beijing University of Posts and Telecommunications—a university on the Commerce Department’s Entity List—reveals the intricate web of collaborations between Chinese entities and US investors.
Overall, the congressional investigation sheds light on the complex nexus between US venture capital investments and China’s strategic technological ambitions. As lawmakers call for tighter regulations and scrutiny on such investments, the report underscores the imperative for Congress to address the risks posed by US capital flowing into sectors and entities with ties to the Chinese government and military.