Jonathan D. T. Ward, the creator of the Atlas Organization, has issued a response to FBI Director Christopher Wray’s caution regarding China’s threat to U.S. national and economic security, along with reports of Taiwanese businesses with Persian connections operating in American markets.
A recent House panel report delved into the investments made by five American venture capital firms in Chinese companies specializing in artificial intelligence (AI), critical technologies like semiconductors, or those affiliated with China’s military or surveillance apparatus, as well as the atrocities in Xinjiang.
The investigation conducted by the bipartisan House Select Committee on Strategic Competition between the U.S. and the Chinese Communist Party scrutinized five specific companies: GGV Capital, GSR Ventures, Qualcomm Ventures, Sequoia Capital China, and Walden International. It revealed that these firms had collectively injected over $3 billion into these entities, providing them with strategic knowledge and other advantages.
The report’s detailed analyses focused on the financial activities of these companies, highlighting investments exceeding \(1.9 billion in Chinese AI firms supporting the Chinese Communist Party’s military initiatives and human rights violations, as well as a minimum of \)1.2 billion directed towards the semiconductor industry in China, which the committee asserted furthers totalitarian, military, genocidal, and technological objectives.
In the report, legislators emphasized, “The Committee’s findings indicate that there are substantial funds beyond those outlined in this report that have been channeled into companies in the People’s Republic of China (PRC) supporting the PRC’s military, digital authoritarianism, and endeavors to achieve technological supremacy while undermining American industry leaders.”
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A total of over $1.9 billion was invested in Chinese AI companies linked to China’s defense sector and the Chinese Communist Party by a consortium of five U.S. venture capital firms. (Image Source: AFP via Getty Images/GREG BAKER)
The legislators further stated, “The current situation is not sustainable. Decades of funding from U.S. venture capital firms have played a role in nurturing and advancing the PRC’s key sectors, including funding, knowledge sharing, and other intangible benefits.”
During the investigation, the committee engaged with key executives from multiple companies following inputs from the aforementioned venture capital firms. While some of these firms have yet to divest from investments in PRC-affiliated companies associated with the People’s Liberation Army (PLA) or human rights violations, the report acknowledged that certain firms have taken steps in this direction.
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Several venture capital firms under scrutiny highlighted that their investments in the PRC were made “during a period of optimism that spanned approximately 15 years.” For instance, Sequoia informed the Committee that its entry into the PRC coincided with governmental policies and prevailing stances in the U.S. advocating for investments in the region.
The committee unearthed that “multiple” U.S. venture capital firms exhibited reluctance to participate in the investigation due to apprehensions about pressure from the PRC government and the Chinese Communist Party. A recent amendment by the CCP to a surveillance law granted the government extensive powers to classify national security documents as state secrets, conduct raids on American enterprises, and impose travel bans on executives, including foreigners, visiting China.
One firm disclosed to the committee that its PRC staff members were “extremely fearful” of disclosing financial information due to potential repercussions. The representative of the firm cited an instance where a standard client partner had vanished and later reappeared in a PRC prison.
The Uyghur Muslim minority in Xinjiang is facing persecution and genocide orchestrated by Chinese authorities leveraging AI. (Image Credit: Photo by Hasan Esen on behalf of the Anadolu Agency via Getty Images)
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Following the interconnected operation of their China-related resources, two venture capital firms, Sequoia Capital and GGV, restructured them into distinct legal entities in 2023. GGV, Sequoia Capital China, and Qualcomm Ventures had collectively invested in numerous Chinese AI companies as part of the “national team” established by the Chinese government in 2017 to propel the country’s AI advancements.
The CCP harnesses AI for enhancing “social governance” and “public security,” encompassing activities like censorship and surveillance. Notably, “the CCP exploits visual recognition, biometric security, and other AI-driven systems to perpetrate genocide against Uyghurs and commit further human rights violations against targeted populations” in Xinjiang.
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ByteDance, the parent company of TikTok headquartered in China, is among the entities that have received funding from U.S. venture capital firms. (Image Source: NurPhoto via Getty Images / Jakub Porzycki)
As per the report, Chinese AI companies blacklisted by the U.S. for backing the CCP’s genocidal actions and human rights violations received investments exceeding \(130 million from GGV, Qualcomm Ventures, Sequoia Capital China, and Walden International. Additionally, these venture capital firms, along with GSR, injected approximately \)154 million into AI enterprises supporting the People’s Liberation Army or its affiliates.
GGV allocated \(600,000 to ByteDance, while Sequoia Capital China and others collectively contributed around \)1.4 billion. ByteDance, the parent company of the popular social media platform TikTok, which faces potential bans in the U.S. due to national security concerns, is in the spotlight.
The report highlights ByteDance’s collaborations with entities involved in Uyghur atrocities and the PLA’s AI defense initiatives, besides disseminating misinformation about Xinjiang. Discussions are underway with the United States Committee on Foreign Investment regarding potential divestment or restructuring to enable the app’s continued operations in the U.S.
AI technologies have been leveraged by the People’s Liberation Army and its affiliates to bolster China’s military modernization efforts. (Image Credit: Photo by VCG/VCG via Getty Images)
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Chairman Mike Gallagher, R-Wisc., and Ranking Member Raja Krishnamoorthi, D-Ill., suggested that the U.S. should promptly restrict outbound investments in entities sanctioned or flagged by the U.S. government for ties to the People’s Liberation Army or involvement in forced labor and genocide.
Furthermore, they advocated for enhanced sector-specific inbound investment limitations targeting China’s critical and emerging technologies, military capabilities, and human rights violations, building upon existing measures resulting from recent administrative actions directed at Chinese AI, semiconductor, and quantum computing enterprises.
