A jogger runs past the U.S. Capitol as the deadline to avert a partial government shutdown approaches at the end of the day on Capitol Hill in Washington, U.S., September 30, 2023.
Ken Cedeno | Reuters
BEIJING – The U.S. Congress has increasingly turned its eye on American capital that has allegedly funded China’s military development, suggesting that greater scrutiny of U.S. investments in China could outlast the president’s term and become part of the law.
After a few false starts in 2023 that never resulted in blocking U.S. investments in certain Chinese industries, some in the House are still pushing to move forward.
“I really believe that Congress needs to step up and enact a permanent solution to this problem, because otherwise we’re going to be going back and forth between different administrations and different executive orders, or different regulators are going to say different things,” Mike Gallagher, the chairman of the The House Special Committee on Strategic Competition between the United States and the Chinese Communist Party said in a statement to CNBC this week.
“I think at least in the advanced technology sectors we need to stop the flow of money. We cannot afford to continue funding our own destruction,” said Gallagher, who is also chairman of the House Armed Services Cyber Subcommittee. Information Technologies and Innovation and on the Permanent Select Committee on Intelligence.
The House of Representatives Special Committee on the CCP, established in January last year, initiated legislation that would essentially ban TikTok in the United States if Chinese parent company ByteDance does not sell the popular social media app. The bill passed the House of Representatives last week and must now pass the Senate if it is to become law.
The House Select Committee also released a report in February that alleged that U.S. venture capital firms had invested billions “in companies in the People’s Republic of China that advance the CCP’s military, surveillance state and Uyghur genocide.”
It is unclear to what extent, if any, U.S. companies were aware of such connections. Beijing has rejected allegations of genocide.
Similar investigations detailing the connections between U.S. capital, venture firms in China, and Chinese tech startups have been making the rounds in major media outlets since late 2023.
The study was prepared by Future Union, which describes itself as a “nonpartisan advocacy group” aimed at uniting private sector capitalism and forward-thinking leaders to address a new wave of emerging technology and security challenges facing the U.S. and their allies stand.
“To ensure that competing and leading technologies have the opportunity to deliver outstanding performance, capital is a critical element,” the report said. “That is why we must return to a level of accountability and fidelity to the rule of law that has made our capital markets and our private sector the envy of the global system.”
Future Union also released a list of what it believes are the largest venture investors in technology and defense that “advance America’s interests through explicit action.”
Little else is publicly available about the advocacy group’s background, other than its executive director, Andrew King, who said in an interview with CNBC that he exclusively funded the group.
“We have not accepted any money from outside groups. It is a non-partisan group. I am the one who can be public, but there are no vested interests,” he said. “Nobody wants to make money from it.”
“It’s just people … who have kind of seen how the economy plays out and how the private markets are abused and exploited.” [that have] “This has cost us a generation of technology,” said King, who is also a managing partner at venture capital firm Bastille Ventures in San Francisco.
Political hurdles
So far it has been difficult for the U.S. government to pass sweeping restrictions on investment in China, although the tough stance on Beijing has been touted as a rare area of bipartisan agreement.
The Senate overwhelmingly passed a bill in July that would have required U.S. investors in advanced Chinese technology to notify the Treasury Department. Although it was a watered-down version of previous proposals that would have restricted such investments, the bill did not pass the House of Representatives.
The Biden administration issued an executive order in August aimed at restricting U.S. investments in semiconductor, quantum computing and artificial intelligence companies, citing national security concerns. The Treasury Department was tasked with implementation after a public comment period. No further details have been released yet.
But building on the executive order, House Foreign Affairs Committee Chairman Michael McCaul and Ranking Member Gregory W. Meeks introduced the Preventing Adversaries from Developing Critical Capabilities Act to also limit investments in hypersonics and high-performance computing.
It is unclear whether and when these proposals will come into force.
When Biden’s executive order was released, China’s Commerce Ministry called on the U.S. to “respect the market economy and the principles of fair competition” and “refrain from artificially impeding global trade and creating obstacles that hinder the recovery of the global economy.”
China’s national financial regulator did not immediately respond to a request for comment for this story.
What’s next?
King said he assumed U.S. companies would need to inform Washington about investments in China related to quantum computing and artificial intelligence, but not much else.
“I think the transparency element is definitely still in play,” he said. “And I think that’s what’s going to happen. I would be surprised if that didn’t happen before the middle of the year.”
“I don’t think there’s a desire to get enough from Congress on either side to get involved [in a] “It’s a sensible way to introduce strict restrictions because there are a lot of entrenched interests,” he said, without elaborating. He noted that the legislation focuses more on companies with military-industrial ties or ties to sanctions, entity lists or export controls.
In addition to blacklisting certain Chinese companies over the past two years, the U.S. Commerce Department has announced sweeping restrictions aimed at blocking China’s access to advanced semiconductor technology.
While U.S. institutional investment in China has largely stalled due to uncertainty over regulation and growth, King said that “I fully expect this will be a lucrative market once China gets through its own economic cycle.”
“Many large asset managers and investment managers who operate globally or want to have a larger presence in China [they] do not want to lose their planning freedom [both] “There are no sides to this divide, regardless of the outcome,” he said.
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2024-03-20 23:16:10
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