China Hawks Maintain Pressure on VC Firms

The leaders of the House Select Committee on the Chinese Communist Party are expanding their investigation into US venture capital firms investing in China’s high technology by launching an inquiry into Sequoia Capital and Sequoia Capital China.

The two entities have announced they will split in early 2024. GGV Capital, another venture capital firm the committee is investigating, recently announced a similar separation of its US and Chinese operations.

Committee Chairman Mike Gallagher (R-Wisc) and ranking Democrat Raja Krishnamoorthi (Ill) are seeking information about Sequoia's investments into PRC artificial intelligence, semiconductor and quantum computing companies, as well as the announced split.

In the letter the lawmakers wrote,“[S]plitting off its China business ... is a step in the right direction. However, additional questions remain regarding how the split may affect flows of U.S. capital and flows of technological know-how from U.S. companies to foreign venture funds.”

The letter also discusses “investments in PRC entities have included certain investments that contributed to the CCP’s human rights abuses, the PRC’s military modernization, and its overall efforts to undermine U.S. technological leadership... Those deals support the CCP’s goals of ensuring technological supremacy and increasing the United States’ dependence on the PRC in critical technologies.”

Problematic Partnerships

The lawmakers say that some of Sequoia Capital China's problematic publicly known partnerships with Chinese companies, which are set to continue even after the split, include:

• Investments in EverSec, a Chinese company developing AI for the People's Liberation Army's (PLA) warning platforms.
• Helping raise $700 million for 4Paradigm, a Chinese company building AI for PLA battlefield programs.
• Investments in DJI, a Chinese drone maker that facilitates the CCP's surveillance and genocide of Uyghurs Muslims in China's Xinjiang region.
• Investments in DeepGlint, a Chinese facial recognition firm blacklisted by the US government and used by the CCP to track Uyghur Muslims and surveil the Chinese population.

• Investments and fundraising for ByteDance, the Chinese company that owns TikTok.

•  As many as 40 investments in Chinese semiconductor companies since 2020. 

  The lawmakers want names and information regarding each company based, or with significant operations, in China that are engaged in research or development in key technology areas that Sequoia Capital or Sequoia Capital China has invested over the past thirteen years. The committee has asked for similar information from four other venture capital firms with significant investments in the PRC.