House committee claims Chinese businesses on the blacklist were sponsored by prominent US venture firms

According to a recent revelation, five businesses have reportedly spent billions of dollars in Chinese enterprises that violate human rights and create military technologies.

A recent study by the House Select Committee on the Chinese Communist Party examines the years-long investment made by Chinese venture capital companies in semiconductor and artificial intelligence enterprises.

A congressional inquiry claims that five US venture capital firms spent at least $3 billion in Chinese businesses that were developing technologies that will be used to violate human rights and benefit the Chinese government and military.

A recent study by the House Select Committee on the Chinese Communist Party examines the years-long investment made by Chinese venture capital companies in semiconductor and artificial intelligence enterprises. According to the research, those corporations invested almost two-thirds of their entire investment, or $1.9 billion, in AI startups whose technology is supporting China's military growth and violations of human rights. The US government has placed corporations on a blacklist in some instances.

"Decades of investment through US VCs—including funding, knowledge transfer, and a variety of intangible benefits—have helped establish and reinforce the PRC's priority sectors," concluded the study.

The committee requests policy adjustments to guarantee that US venture money is prohibited from supporting Chinese national security and surveillance initiatives, but it does not contest the legitimacy of the investments.

The committee started the probe last year by requesting information from venture capitalists, including some of the biggest US investors: Walden International, Sequoia Capital, Qualcomm's venture capital division, GGV Capital, and GSR Ventures. According to the research, US limited partners, including pension funds and university endowments, made investments in China via firms.

According to the research, a significant number of the startup investments were made years ago, prior to Washington designating the businesses as national security concerns and, in some instances, the venture firms selling their shares.

The majority of Sequoia's investments in China, according to the corporation, were overseen by its China division, which is now a distinct, independent business. Qualcomm claimed to have made very little investment in China. According to GGV Capital, it was creating a distinct division for its China operations and had screenings in place for problematic investments.

Requests for comments on the report from Walden and GSR were not answered. According to GSR, the venture partners who had previously contributed to the transactions that the House committee looked at have left the company.

According to the research, the five businesses have together invested over $140 million in artificial intelligence (AI) companies that provide technology to the Chinese military or its contractors, and over $130 million in AI startups that have been highlighted by the US government as potentially supporting human rights violations.

Since its formation last year, the group has made a greater effort to dissuade American companies from backing Beijing's technological goals. The goal is to impede China's technological advancements, which may be used to wage war against the US in the future, or to help Beijing establish a surveillance state.

We need to stop funding, at least in areas of sophisticated technology," the committee chairman, conservative Representative Mike Gallagher of Wisconsin, said. "We have no means to continue funding our own destruction."

The committee's activities reflect a change in Washington's perspective toward U.S.-China investment relations, which has placed certain venture-capital companies under scrutiny. In previous years, there was a burgeoning middle class of enthusiastic digital users in China, and many in Silicon Valley's venture-capital community were keen to invest there to take advantage of the chance for new tech businesses selling to the broader population. Such investments were encouraged by Washington as a means of promoting change in China.

Sequoia and GGV set up shop in China years ago, while Walden and GSR made investments there but maintained their US offices. Chinese venture finance flourished thanks to seed money from American enterprises.

Sequoia Capital, which makes investments in the US and Europe, said through a spokesman that the company's China division has always operated with a separate team that manages a separate fund while making its own investment decisions. As of December, the China enterprises will operate under a new name, Hongshan.

"We take US national security issues seriously whilst we always have procedures in place to ensure adherence to US law," said a spokeswoman.

According to a Qualcomm representative, the company's investments are typically modest and make up less than 2% of all the investments included in the committee's report.

According to a representative for GGV Capital, the business will "comply with all applicable laws and regulations" and finish severing its ties to its China fund by the end of the month."It complies with the regulations" and intends to do so going forward. Investment guidelines. Moreover, she is attempting to sell her investment in a few Chinese firms.

The escalation of US-China relations and Beijing's control over cash flows and the IT sector have made investing in China less appealing. Data from Rhodium Group shows that U.S. venture capital investment in China increased from over $1.2 billion in 2010 to over $19 billion in 2018, when it peaked, and then dropped to $1.3 billion in 2022.

In order to prevent Americans from funding certain Chinese businesses that are creating quantum computers and sophisticated semiconductors, President Biden signed an executive order last year. A measure mandating that American investors inform the government of any significant purchases of crucial technology from China and other rivals was enacted by the Senate last year. However, after being left out of the National Defense Policy Bill, the proposal proved unsuccessful.

More limitations on foreign investment are demanded by the latest study.

It includes more than two dozen AI firms, from modest start-ups to big international conglomerates, such as ByteDance, the parent company of the TikTok video-sharing app, and SZ DJI Technology, a manufacturer of drones.

According to the article, ByteDance received around $1.4 billion from the China Fund and an additional $600,000 from GGV Capital in addition to acquiring Sequoia's U.S. operations. In all, ByteDance has raised almost $9 billion. According to the study, ByteDance has worked with businesses that oppress the Uyghur minority in Xinjiang, China. According to the article, DJI has raised millions of dollars from Walden International and Sequoia's China subsidiary. It has also given drones to the public security authorities in Xinjiang. Beijing uses DJI as a surveillance tool, and Washington has approved of its usage.

ByteDance chose not to respond.

DJI claims to be independent of the military and opposes the use of its drones in hostilities.

We vehemently refute any accusations of violations of human rights made against DJI. The business said, "We don't engage in any activities that infringe upon or violate human rights."