Uncle Sam would rather Silicon Valley VCs did not invest in Chinese AI
Qualcomm's venture arm among the firms under investigation
A US congressional panel is investigating four venture capital firms, including the investment arm of semiconductor company Qualcomm, regarding financing of Chinese AI, semiconductor and quantum technologies.
So far the House Select Committee on the Chinese Communist Party said it has sent letters to GGV Capital, GSR Ventures, Qualcomm Ventures and Walden International highlighting its concerns and asking for further details of China-based investments by August 1.
They were written by the top two committee members, Wisconsin Republican Mike Gallagher and Illinois Democrat Raja Krishnamoorthi, and rely on information from a Center for Security and Emerging Technology (CSET) report released in February.
The report [PDF] aims to identify the main US investors active in the Chinese AI market, and which Chinese companies benefited from US capital between 2015 and 2021.
"Private equity (PE) and VC investments play an important role in funding China's AI advancement. With extensive support from Chinese government actors as well as foreign capital and networks, including those from the United States, China's PE and VC market has grown to become the world's second largest, following that of the United States," said CSET.
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For Qualcomm Ventures (QV), the committee highlighted concern over its investment in Zongmu, a self-driving vehicle company that claims to promote Chinese military-civilian integration.
According to the committee, QV also invested 13 times over the span of six years in SenseTime, which the committee said [PDF] was linked to efforts to profile and track the Chinese Muslim minority Uyghur population.
QV was also said to have invested in the People's Republic of China (PRC) based GPU AI chip startup Denglin Technology thereby advancing the PRC semiconductor industry, and advised and directed investment activities of the Strategic China Venture Fund, which supports Chinese startups and holds semiconductor investments as a strategic priority.
GGV Capital drew concern for its investment in Megvii, a software developer of AI systems that can detect Uyghur people and issue automated alarms to authorities. The technology earned Megvii a spot on the US Bureau of Industry and Security's Entity List for human rights abuses. The panel also cited other investments it was concerned about – 43 that were PRC AI-related in the six years measured.
The committee said Walden International has also invested in a company on the US Entity List for enabling Uyghur surveillance in Xinjiang province, Intellifusion. The Shenzhen company calls itself "a leader of non-cooperative facial recognition."
Furthermore, the panel said 39 percent of Walden's AI investments were in PRC companies in the six years CSET analyzed.
Finally, the committee cites a report from the Center for Security and Emerging Technology (CSET) that claims GSR Ventures was a top US-located investor in Chinese AI between 2015 and 2021, with 33 investments in PRC AI enterprises during that time.
"These transactions not only help finance the development of technology that is directly contrary to US national interests, but also risk transferring critical know-how and expertise from the US to the PRC," said the panel. ®