The House Select Committee on the Chinese Communist Party sent letters to four separate U.S. venture capital firms, including Qualcomm’s venture arm, expressing “serious concern” about their investments in Chinese tech startups.
The letters, which were made public on Wednesday, were sent to GGV Capital, GST Ventures, Qualcomm Ventures, and Walden International. They were written by and Wisconsin Republican Mike Gallagher and Illinois Democrat Raja Krishnamoorthi, the top two members on the committee.
Of particular concern to the lawmakers are investments in artificial intelligence, chipmakers and quantum computing companies in China. They also noted that some of the companies to receive U.S. money have been linked to the profiling and tracking of Uyghur ethnic minorities in China.
“Like AI, the domestic development of semiconductors is a top priority of the Chinese Communist Party,” the letter says. “Semiconductors are essential for artificial intelligence, quantum computing, and other advanced dual use technology.”
Representatives from the four venture firms who received the letters did not immediately respond to requests for comment.
The outreach represents the latest bipartisan effort by politicians to step up pressure on U.S. investments in China as tension swells between the world’s two largest economies and national security concerns escalate. U.S. Treasury Secretary Janet Yellen traveled to China earlier this month as part of a plan to stabilize relations with China. Secretary of State Antony Blinken visited in June.
In their letter, Gallagher and Krishnamoorthi linked dozens of particular investments to human rights violations and efforts to enhance China’s military, which runs counter to American interests.
Qualcomm Ventures, for example, made 13 investments in Chinese A.I. companies from 2015 to 2021, according to the letter. One investment was in SenseTime, which a New York Times report linked to Chinese tracking and profiling of the Uyghurs.
In addition to Qualcomm, PitchBook data shows that U.S. firms Tiger Global Management and Silver Lake, which were not mentioned in the letter, invested in SenseTime prior to its 2021 IPO.
A person familiar with the matter said Tiger had since fully exited its position in SenseTime, which it had taken on prior to the New York Times reporting.
Silver Lake did not immediately return a request for comment.
Qualcomm’s investment in Denglin Technology, an apparent competitor, also faces Congressional scrutiny. Qualcomm was one of Denglin’s earliest backers, according to PitchBook, and invested in an additional 2022 funding round.
The firm with the most potentially problematic investments, according to the letter is GGV Capital, which has offices in Silicon Valley, San Francisco, Shanghai, Beijing and Singapore. The letter identified 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 Technology.
GGV has $9.2 billion in assets under management, and established operations on the ground in China in 2005. Even before that, it invested in Chinese e-commerce giant Alibaba, and subsequently backed TikTok parent ByteDance and ride-hailing company Didi.
Gallagher and Krishnamoorthi identify GGV’s investment in Megvii, a Beijing-based facial recognition software provider, as a point of concern. The company “actively supports the surveillance of Uyghurs,” the letter says.
Megvii is backed by a number of major investors, including Alibaba, Foxconn and the Macquarie Group. GGV invested in Megvii in 2019 alongside Abu Dhabi’s sovereign wealth fund in a deal that valued the company at about $4 billion.
Walden, a smaller firm, was identified as a particularly significant backer of Chinese AI companies. The letter said that from 2015 to 2021, at least 39% of the firm’s AI deals were in that sector, including one investment in a now blacklisted company called Intellifusion.
Intellifusion has since gone public and has a market cap of 22 billion Chinese yuan, or roughly $3 billion.
Regarding GSR Ventures, the letter said the firm “was among the top U.S.-located investors in PRC artificial intelligence companies between 2015 and 2021, according to a recent report by the Center for Security and Emerging Technology.” The lawmakers cited 33 distinct investments in the six-year period, including Horizon Robotics, which was last privately valued at $5 billion in 2021.
The letters advance Gallagher’s push for controls on U.S. money in key technologies in China.
After meeting with Silicon Valley executives in April, Gallagher told CNBC in an interview that he “emerged from that day cautiously optimistic that we could put in place some sensible controls on American capital flowing to China that would allow us to not fund our own destruction or fund our own loss in the great AI race.”
He said at the time he found there was “broad support” among venture capitalists and others to keep U.S. asset managers from investing in Chinese AI firms.
The U.S. Commerce Department has also considered steps to ensure U.S. technologies can’t be overly leveraged by China to advance its own AI efforts. The Wall Street Journal reported last month that the agency was weighing further limits on advanced chips used for AI that could be exported to China.
Pressure has been building on VC firms with substantial investments in China, in part due to concerns over intellectual property theft within technology and a budding AI race. Last month, legendary VC firm Sequoia Capital saidit would split its international business into three parts, with Neil Shen helming its powerful Sequoia China unit.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
