The House Select Committee of the Chinese Communist Party sent letters to four separate US venture capital firms, including of Qualcomm venture arm, expressing “serious concern” about its investments in Chinese tech startups
The letters, made public on Wednesday, were sent to GGV Capital, GST Ventures, Qualcomm Ventures, and Walden International. They were written by Mike Gallagher, Republican of Wisconsin, and Raja Krishnamoorthy, Democrat of Illinois, the top two members of the committee.
Of particular concern to lawmakers are investments in artificial intelligence, chipmakers and quantum computing companies in China. He also noted that some companies receiving US money have been linked to the profiling and tracking of the Uyghur ethnic minority in China.
“Like AI, the domestic development of semiconductors is a top priority of the Chinese Communist Party,” the letter said. “Semiconductors are essential to artificial intelligence, quantum computing, and other advanced dual-use technologies.”
Representatives of the four venture firms that received the letters did not immediately respond to requests for comment.
The access represents the latest bipartisan effort by politicians to increase pressure on U.S. investment in China as tensions between the world’s two largest economies mount and national security concerns mount. US Treasury Secretary Janet Yellen visited China earlier this month as part of a plan to strengthen ties with China. Secretary of State Antony Blanken visited in June.
In their letter, Gallagher and Krishnamurthy linked dozens of specific investments to human rights abuses and efforts to build up China’s military, which is against US interests.
For example, Qualcomm Ventures made 13 investments in Chinese AI companies from 2015 to 2021, according to the letter. One investment, now in publicly traded SenseTime, was linked by The New York Times. Reports For Chinese tracking and profiling of Uighurs.
In addition to Qualcomm, PitchBook data shows that US firms Tiger Global Management and Silver Lake, which were not mentioned in the letter, invested in SenseTime ahead of its 2021 IPO.
Tiger Global did not immediately return a request for comment.
Qualcomm’s investment in Dinglin Technology, an ostensible competitor, is also facing congressional scrutiny. According to PitchBook, Qualcomm was one of Denglin’s early backers, and invested in an additional 2022 funding round.
The most likely distressed investment firm, according to the letter, is GGV Capital, which has offices in Silicon Valley, San Francisco, Shanghai, Beijing and Singapore. The letter identifies 43 different investments in Chinese AI companies from 2015 to 2021, more than any other identified by independent researchers at Georgetown’s Center for Security and Emerging Technologies.
GGV has $9.2 billion in assets under management, and began operations on the ground in China in 2005. Before that, it invested in Chinese e-commerce company Alibaba, and later backed TikTok’s parent BiteDance and ride-hailing company Didi.
Gallagher and Krishnamurthy point to GGV’s investment in Beijing-based facial recognition software provider Magui. The company “actively supports the monitoring of Uyghurs,” the letter said.
Megvii is backed by several major investors including Alibaba, Foxconn and Macquarie Group. GGV invested in Megvii in 2019 in a deal with Abu Dhabi’s sovereign wealth fund that valued the company at around $4 billion.
Walden, a smaller firm, was identified as a particularly important backer of Chinese AI companies. The letter said that from 2015 to 2021, at least 39 percent of the firm’s AI deals were in the sector, including an investment in a now-blacklisted company called IntelliFusion.
IntelliFusion has since gone public and has a market cap of 22 billion Chinese yuan, or about $3 billion.
Regarding GSR Ventures, the letter said the firm was “among the top US investors in PRC artificial intelligence companies between 2015 and 2021, according to a recent report by the Center for Security and Emerging Technologies.” Lawmakers cited 33 separate investments over a six-year period, including Horizon Robotics, which was last valued privately at $5 billion in 2021.
The letters continue Gallagher’s push for control of US money in key technologies in China.
After meeting with Silicon Valley executives in April, Gallagher told CNBC in an interview that he was “cautiously optimistic about the day that we can establish some sensible controls on US capital flowing to China that will not allow us to fund our own destruction or our loss in the great AI race.”
He said at the time he learned there was “broad support” among venture capitalists and others to prevent American asset managers from investing in Chinese AI firms.
The U.S. Commerce Department has also considered steps to ensure that China cannot take advantage of U.S. technologies to advance its AI efforts. The Wall Street Journal It was reported last month that the agency is weighing further limits on advanced chips used for AI that can be exported to China.
VC firms investing heavily in China are under increasing pressure, due to concerns about intellectual property theft within technology and the emerging AI race. Last month, legendary VC firm Sequoia Capital said It will split its international business into three divisions, with Neil Sheen supporting its powerful Sequoia China unit.
Watch: AI will be critical for the US to maintain its lead over China.