The House Select Committee on the Chinese Communist Party sent letters to four separate US venture capital firms, including Qualcomm’s venture arm, expressing “serious concern” about their investments in Chinese tech startups.
The letters, which were made public on Wednesday, were sent to GGV Capital, GST Ventures, Qualcomm Ventures and Walden International. They were authored by Wisconsin Republican Mike Gallagher and Illinois Democrat Raja Krishnamoorthi, the two leading members of the committee.
Of particular concern to lawmakers are investments in artificial intelligence, chipmakers and quantum computing companies in China. They also noted that some of the companies set to receive US money have been linked to profiling and monitoring ethnic Uyghur minorities in China.
“Like AI, domestic semiconductor development is one of the top priorities of the Chinese Communist Party,” the letter reads. “Semiconductors are essential for artificial intelligence, quantum computing, and other advanced dual-use technologies.”
Representatives for the four venture firms that received the letters did not immediately respond to requests for comment.
The scope represents the latest bipartisan effort by politicians to increase pressure on US investments in China as tensions rise between the world’s two largest economies and national security concerns rise. US Secretary of the Treasury janet yellen he traveled to China earlier this month as part of a plan to stabilize relations with China. Secretary of state Antonio Blinken visited in June.
In their letter, Gallagher and Krishnamoorthi linked dozens of private investments to human rights violations and efforts to upgrade China’s military, which runs counter to US interests.
Qualcomm Ventures, for example, made 13 investments in Chinese AI companies between 2015 and 2021, according to the letter. One investment was in SenseTime, which a New York Times report linked to Chinese tracking and profiling of Uyghurs.
Qualcomm’s investment in Denglin Technology, an apparent competitor, also faces congressional scrutiny. Qualcomm was one of Denglin’s early backers, according to PitchBook, and has invested in an additional funding round for 2022.
The firm with the potentially most problematic investments, according to the letter, 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 between 2015 and 2021, more than any other identified by independent researchers at Georgetown’s Center for Security and Emerging Technology.
GGV has $9.2 billion in assets under management and established operations in China in 2005. Even before that, it invested in Chinese e-commerce giant Alibaba, and subsequently backed TikTok’s parent company ByteDance and Shared transport Didi.
Gallagher and Krishnamoorthi identify GGV’s investment in Megvii, a Beijing-based facial recognition software provider, as a point of concern. The company “actively supports surveillance of Uyghurs,” the letter says.
Megvii is backed by several major investors, including Alibaba, Foxconn, and Macquarie Group. GGV invested in Megvii in 2019 together with the Abu Dhabi sovereign wealth fund in a deal that valued the company at about $4 billion.
Walden, a smaller company, was identified as a particularly important backer of Chinese AI companies. The letter said that from 2015 to 2021, at least 39% of the company’s AI deals were in that sector, including an investment in a now-blacklisted company called Intellifusion.
Intellifusion has since gone public and has a market capitalization of 22 billion Chinese yuan, or roughly $3 billion.
Regarding GSR Ventures, the letter said that the company “was among the largest US-based investors in artificial intelligence companies from the People’s Republic of China between 2015 and 2021, according to a recent report from the Center for Security and Emerging Technology.” “. Lawmakers cited 33 separate investments in the six-year period, including Horizon Robotics, which was last privately valued at $5 billion in 2021.
The letters advance Gallagher’s drive to control US money in key technologies in China.
After meeting with Silicon Valley executives in April, Gallagher told CNBC in an interview that he “came out of that day with cautious optimism that we could put in place some sensible controls on the flow of US capital into China that would allow us not to finance our own destruction or finance our own loss in the great AI race.”
He said he found at the time that there was “broad support” among venture capitalists and others to prevent US asset managers from investing in Chinese AI companies.
The US Department of Commerce has also considered steps to ensure that China cannot take too much advantage of US technologies to advance its own AI efforts. The Wall Street Journal reported last month that the agency was considering additional limits on advanced chips used for AI that could be exported to China.
Pressure has been building on venture capital firms with substantial investments in China, partly due to concerns about intellectual property theft within the technology and a fledgling AI race. Last month, the legendary venture capital firm Sequoia Capital said I would be split your international business in three parts, with Neil Shen leading his powerful Sequoia China unit.
