Giving China Weapons of Market Destruction

Giving China Weapons of Market Destruction
A woman leaves the stock exchange building in Shanghai, in a file photo. (Hector Retamal/AFP via Getty Images)
Thomas McArdle

Green Bay, Wisconsin, Republican Mike Gallagher’s House Select Committee on the Chinese Communist Party last week scored Washington’s most important bipartisan victory in decades—days before Mr. Gallagher announced he won’t be running for reelection, in an example of just how strange and unpredictable Congress and the Republican Party have become.

Presenting incontestable evidence, the panel has let American venture capital firms that place the worship of the almighty dollar before their patriotic duty know that the GOP and even high-ranking Democrats in Congress, such as the select committee’s ranking member Raja Krishnamoorthi (D-Ill.), won’t tolerate these firms’ multibillion-dollar financing of the quest for global military and economic dominance over the United States by America’s most powerful adversary, the People’s Republic of China (PRC).

Before his election to Congress, Mr. Gallagher served as an intel officer in the Marines in Iraq, working directly for counterinsurgency wizard Gen. David Petraeus—an experience that has come in handy here. Reading the select committee’s actual just-released report titled “How American Venture Capital Fuels the PRC Military and Human Rights Abuses,” as opposed to media summaries and caricatures, sparks the same fury that comes with reading, say, the collected letters of Benedict Arnold.

Taking a microscope to just a small sample of five American venture capital (VC) firms, the Gallagher-led analysis discovered “investments worth at least $3 billion into PRC technology companies that facilitate human rights abuses including genocide, contract with the Chinese military, or strengthen the PRC’s semiconductor supply chains and advance China’s national security ambitions.”

The panel also disclosed those five firms’ “intangible support, including expertise, to [mainland Chinese] companies, including problematic PRC companies in the targeted sectors.” The tiny sample studied means that the report’s findings “significantly understate the amount of U.S. investment and expertise that has flowed into companies linked to the People’s Liberation Army (PLA) or the CCP’s human rights abuses.”

The investigative report’s 45 pages and 325 endnotes of documentation rattle off horror story after horror story. The five firms examined—GGV Capital, GSR Ventures, Qualcomm Ventures, Sequoia Capital, and Walden International, all based in California/Silicon Valley—can’t have known the full extent of what a Marxist state lacking personal freedoms would subject those of their personnel who were based in China to.

We find, for instance, that “one firm told the Committee that its PRC personnel were ‘scared to death’ about providing basic fund information to the Committee because of potential repercussions in the PRC.” The same firm said that “one of his clients, a general partner, had disappeared—and re-appeared in a PRC prison.”

The Chinese Communist Party (CCP) had GSR Ventures so cowed that the VC firm at first defied the committee, refusing to provide any information about its investments held in Chinese currency for fear of violating Beijing’s purported “data privacy rules.” Even after “extensive negotiations” with the committee, GSR refrained from revealing the exact amounts it has invested in Chinese firms—a remarkable spectacle: an American business placing the dictates of a communist regime above inquiries from the U.S. Congress.

One of the most chilling areas in which U.S. venture capital is invested in China is artificial intelligence (AI). The committee report notes, “The PRC uses AI for ‘social governance’ or ‘public security,’ a euphemism for censorship and surveillance.” In Xinjiang, the home region of the persecuted Uyghurs, and elsewhere in mainland China, the CCP uses AI for “facial recognition, biometric surveillance,” and other technologies enhanced by AI “to perpetrate genocide against Uyghurs and commit other human rights abuses against targeted populations.”

The CCP’s persecution of the Uyghurs over the past decade or more has ranged from forced abortion, sterilization, and contraception to incarceration in concentration camps, the destruction of countless mosques, and outright genocide.

Beijing also uses AI to extend and modernize the abilities of its massive military, and the panel looked at American venture capital investment in AI companies with links to the PLA, China’s combined military forces.

“The PLA is using AI to advance its intelligence, surveillance, reconnaissance, and command and control capabilities,” the report states. “This includes leveraging AI to make split-second wartime decisions and to detect U.S. ships and aircraft quickly and accurately. The Committee’s investigation confirmed that U.S.-based venture capital firms have invested in PRC companies that contract with the PLA.”

The five VC firms invested more than $1 billion in Chinese AI companies supporting or facilitating Beijing’s human rights abuses and surveillance activities or providing support to the Chinese military.

Robert Hanssen, who died last summer, and Aldrich Ames were both given life sentences without any possibility of parole for providing to Russia and the Soviets highly classified information that blew the covers of American spies and Russian counterspies reporting to the United States, resulting in many of them being killed; revealed to Moscow the details of more than 100 intelligence operations; and filled the Soviets in on nuclear war strategies and weapons technologies.

Placing the delivery of that kind of devastating information alongside the handing over of $3 billion in cash to a communist regime’s corporate minions, it’s hard not to consider both sets of treachery as comparable in value to an authoritarian power on a mission to subjugate the free world.

In early 2019, GGV Capital began investing more than $15 million in the Chinese surveillance technology firm Megvii, which has worked with the notorious telecom company Huawei on “Uyghur alarms,” using AI to detect members of that persecuted ethnic minority within a crowd. Intellifusion, embraced by Walden International, features the “DeepEye” facial recognition system believed to have the ability to “recognize a suspect from a million people in just one second.”

Walden’s Malaysian-Chinese founder and chairman, Lip-Bu Tan, who boasts a master of science in nuclear engineering from MIT, was actually ranked as the No. 1 most well-connected executive in the entire technology industry.

Qualcomm Ventures invested $19.5 million into the Chinese facial recognition firm SenseTime in 2017 and 2018, subsequently “reviewing the potential investment entity’s customer list to assess whether the entity’s product has military end uses.”

In 2006, Sequoia Capital China invested a total of $48 million total in Qihoo 360, pulling out its investments in dollars in the summer of 2015. In 2017, it was announced that Qihoo 360 was the leader of Beijing’s Cyberspace Security Military-Civil Integration Innovation Center, whose purpose is to strengthen China’s cyber defenses. Qihoo 360 also works closely with the government agency that manages China’s military industry.

Sequoia Capital China, beginning in 2015, has invested more than $80 million in the Chinese firm 4Paradigm, which has contracted with the PLA’s Armored Forces Academy to provide command decision-making software. Sequoia has also invested $36 million into the drone manufacturer DJI beginning in 2014. A little more than two years ago, the U.S. Treasury Department accused DJI of providing drones to the Xinjiang Public Security Bureau. Walden International has also invested in DJI, with one of its partners reportedly having served as DJI’s executive vice chairman of innovation. It’s documented that DJI drones have been sold to the PLA.

The committee found that GGV has as much as $10 million in Chinese currency invested in Airlook, another drone company that has admitted to being a “military-civilian integration enterprise” and whose CEO has stated that his firm has “created a path for civilian use of military technology” and “enjoyed the benefits of the country’s policies that encourage military-civilian integration.” Airlook has a strategic cooperation agreement with Chinese entities that provide Beijing with satellite data and aerial photography.

The committee analysis notes that “U.S. venture capital firms have invested into PRC artificial intelligence chip companies that seek to do exactly what U.S. export controls are meant to stop: advance China’s AI chip industry.” Such advanced computer chips are indispensable in Beijing’s development of advanced AI technologies for the military and surveillance sectors.

During the Trump administration, the Export-Import Bank of the United States, under the leadership of Kimberly Reed, who worked closely with Mr. Gallagher, then a member of the House of Representatives China Task Force, scrutinized the exploitation of trade and investment with China in multiple categories of advanced technology for veiled military and economic warfare purposes. The select committee now demands new federal laws severely restricting U.S. investments in Chinese entities serving the military or assisting the regime’s persecution of its own people.

No one should be naive, however. Even the force of law—witness defiance of the export controls—will be insufficient until a popular stigma is cultivated among ordinary Americans that results in the shunning of these massively rich venture capital companies, treating them as the Benedict Arnolds/Robert Hanssens/Aldrich Ameses that they are.

Now on the path to exit Congress, Mr. Gallagher, who declined overtures from Senate Republicans to run for U.S. Senate last year, went against the wishes of most of his House GOP colleagues last week by helping to temporarily stall the impeachment of Homeland Security Secretary Alejandro Majorkas. Whatever this tough Marine’s future, a man who can stand up to CEOs who place lucre before liberty might also be able to steer the Republican Party of the 21st century toward pairing strength against our enemies abroad with permanent border security.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Thomas McArdle was a White House speechwriter for President George W. Bush and writes for
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