US Venture Capital Firms Are Supporting China’s Military: House Panel

US Venture Capital Firms Are Supporting China’s Military: House Panel
Attendees walk by the Qualcomm booth during CES 2019 at the Las Vegas Convention Center in Las Vegas, Nevada, on Jan. 9, 2019. (Justin Sullivan/Getty Images)
Andrew Thornebrooke

The House Select Committee on the Chinese Communist Party (CCP) is opening investigations into several U.S. venture capital firms that it claims are funding China’s development of artificial intelligence (AI) and military modernization.

Committee Chairman Rep. Mike Gallagher (R-Wis.) and Rep. Raja Krishnamoorthi (D-Ill.), the panel’s ranking Democrat member, sent letters to the leaders of the four firms, demanding to know the extent of their dealings with the regime in Beijing, a person close to the committee told The Epoch Times.

Mr. Gallagher and Mr. Krishnamoorthi say that the VC funds GGV Capital, GSR Ventures, Walden International, and Qualcomm Ventures—the venture arm of wireless technology company Qualcomm—are investing in Chinese AI and semiconductor companies that the lawmakers claim the regime uses to expand its human rights abuses and military modernization.

“[China] is actively seeking out and using advancements in AI to perpetrate human rights abuses and enhance its military capabilities,” one of the letters says. “It is likewise using advancements in quantum computing and semiconductor manufacturing to support the People’s Liberation Army (PLA).”

The letters also request that the leadership of each of the funds answer a series of questions regarding their investments in Chinese companies, including what companies they are investing in, the dollar amounts of each investment, their policies concerning investments in such companies, and what course of action the funds would take if companies they invested in were sanctioned by the U.S. government.

Firms Aid CCP Military Modernization

U.S. firms’ investment in communist China is nothing new. The nation’s largest tech and venture capital firms have been supercharging the regime’s technological development for decades.

Despite such warnings, the overarching U.S. strategy of prioritizing economic engagement with China has remained relatively unchanged for decades. While more than 400 Chinese entities have been put on a U.S. trade blacklist, the CCP’s strategy of quickly reforming, renaming, and replacing these entities is muddling the effectiveness of such measures and increasing the complexity of the ties that bind the Chinese military with the U.S. business community.

The committee’s letters seek answers from company leadership about specific investments in Chinese companies directly linked to the CCP regime’s military modernization and human rights abuses.

The letters accuse GGV of investing in Megvii, a company that the committee’s leaders claim actively supports the CCP’s surveillance of the predominantly Muslim Uyghur minority group.

Chinese People's Liberation Army (PLA) soldiers assembling during military training at Pamir Mountains in Kashgar, northwestern China's Xinjiang region, on Jan. 4, 2021. (STR/AFP via Getty Images)
Chinese People's Liberation Army (PLA) soldiers assembling during military training at Pamir Mountains in Kashgar, northwestern China's Xinjiang region, on Jan. 4, 2021. (STR/AFP via Getty Images)
Likewise, the letters claim that GSR has partnered in AI investments with iFlytek, a company blacklisted by the Biden administration for its role in supporting the ongoing Uyghur genocide.

Walden International and Qualcomm Ventures, the letters say, have made numerous investments in companies either directly enabling the CCP’s human rights abuses or military modernization, including companies that openly proclaim their goal of promoting “the development of military-civilian integration.”

Despite the widespread problem of U.S. investment in CCP-linked companies, stemming the flow of U.S. technologies and monies into the hands of the Chinese military isn’t a straightforward task.

Many Chinese laws facilitate technology transfers from companies doing business in China, regardless of whether that company is a willing party to the transfer.

The CCP also enforces strict requirements on joint ventures and foreign businesses with locations on the mainland. Many of those requirements demanded from companies by the regime’s national security, intelligence, cybersecurity, and data export laws are designed to facilitate technology transfers or to encourage them as a secondary effect.

‘Military-Civil Fusion’

To that end, the select committee’s letter directly calls out Beijing’s “military-civil fusion“ (MCF) strategy and the companies’ apparent role in assisting it.
Under the MCF strategy, the whole of Chinese society is mobilized to participate in the “great rejuvenation” of the Chinese nation by modernizing the CCP’s military wing, the People’s Liberation Army (PLA).

Citing a U.S. State Department brief on the MCF strategy, the committee’s letters lay bare how U.S. VC dollars can be co-opted by the CCP regime to directly improve its capacity to harm the United States and its allies.

“China’s policy of military-civil fusion—which ‘[eliminates] barriers between [China’s] civilian research and commercial sector and its military and defense industrial sectors’—ensures that no technology company in China is truly a private company,” the letters say.

“American venture capital and private equity investments in [Chinese] AI, quantum, and semiconductor companies directly contribute to [China’s] human rights abuses, military modernization, expansion of authoritarianism around the globe, and [China’s] overall effort to supplant U.S. technological leadership.”

Representatives of GGV, GSR, and Qualcomm Ventures didn’t respond by press time to a request by The Epoch Times for comment. Walden International couldn’t be reached for comment.

Andrew Thornebrooke is a national security correspondent for The Epoch Times covering China-related issues with a focus on defense, military affairs, and national security. He holds a master's in military history from Norwich University.
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