US Venture Capital Investment in China

As lawmakers raise questions of whether restrictions should be imposed on US investment in China, the Select Committee on the Chinese Communist Party is launching an investigation into US venture capital firms’ investment in Chinese cutting edge technologies.

Committee Chairman Mike Gallagher (R-Wisc) and ranking Democrat Raja Krishnamoorthi (Ill) sent letters to four US venture capital firms – GGV Capital, GSR Ventures, Qualcomm Ventures and Walden International – demanding information about the firms' investments in Chinese artificial intelligence, semiconductor and quantum companies.

In the letters, the lawmakers highlighted concerning investments from the US firms in PRC-based AI and semiconductor companies, including:

• GGV Capital invested in PRC-based AI company Megvii, which actively supports China’s efforts to profile and track Uyghurs – “ushering in a new era of automated racism.”

• GSR Ventures was among the top US-located investors in PRC artificial intelligence companies between 2015 and 2021, according to a recent report by the Center for Security and Emerging Technology. 

• Qualcomm Ventures invested in Zongmu, a PRC-based firm focused on self-driving vehicles that operates at an industrial park that lists as one of its focuses “promoting the development of military-civilian integration.”

•  From 2015 to 2021, at least 39 percent of Walden’s AI investments were in PRC companies. Walden has invested in Intellifusion, an AI company that the Commerce Department placed on its Entity List for enabling PRC surveillance in Xinjiang. In 2017, Intellifusion won the Xinjiang Security Excellent Enterprise Award.

“China’s policy of military-civil fusion, which “eliminat[es] barriers between the PRC’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 lawmakers wrote.

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

The letters were sent on the same day that the Select Committee hosted what it billed as a “thunderdome” debate among four China economic policy experts that included an exchange of views over US-China investment flows.