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A US congressional panel has accused five venture capital firms, including Sequoia Capital China and Qualcomm Ventures, of investing more than $3bn in Chinese groups that support China’s military and of facilitating genocide and other human rights abuses.
The House of Representatives China committee on Thursday released the results of an investigation which found that the firms, which include Walden International, GGV Capital and GSR Ventures, invested more than $1.9bn in groups involved in artificial intelligence and at least $1.2bn in entities that help China develop its chip industry to further its “military, genocidal, and techno-totalitarian ambitions”.
Mike Gallagher, the Republican head of the panel, and his Democratic counterpart, Raja Krishnamoorthi, warned that their investigation had only captured a slice of the VC money that they believed was helping China.
“The committee’s findings suggest that there are billions of dollars beyond those captured in this report that have flowed into [People’s Republic of China] companies that support the PRC’s military, digital authoritarianism and efforts to develop technological supremacy and undermine American technological leadership,” they wrote.
The two lawmakers said decades of investment, and other intangible benefits such as knowledge transfers, from American VC firms had helped China strengthen its priority sectors, adding: “The status quo is untenable.”
The report is the latest effort by the panel to step up scrutiny of companies with investments in China that they say undermine US national security. The Financial Times reported recently that the panel had asked the chief executives of several chip companies, including Intel and Nvidia, to appear before lawmakers for what would be the first testimony from executives before the panel since it was established in January 2023.
The investigation comes as the US Treasury works on drafting regulations prohibiting investment into certain Chinese sectors following an executive order from President Joe Biden last year. Congress has also been debating various bills to restrict outbound investment but it has been caught in infighting between various committees.
Gallagher and Krishnamoorthi called on the administration to expand the planned investment restrictions beyond the current targets — AI, chips and quantum computing — to include other critical and emerging technologies.
Sequoia Capital, which last year split off its Chinese investment arm (HongShan, which was previously called Sequoia Capital China), said each entity under its brand had always made “independent investment decisions”. It said it took “US national security issues seriously and have always had processes in place to ensure compliance with US law”.
GGV, which also announced it was splitting its US and Asia businesses last year, said both parts of the firm “have been in compliance with all applicable laws and regulations and will continue to be in compliance with any future applicable laws and regulations”.
“Qualcomm’s investments are generally small in any given market compared to venture firms and constitute less than 2 per cent of the total investments discussed in today’s report,” said a Qualcomm spokesperson.
GSR and Walden International did not immediately respond to requests for comment.
Firms are increasingly nervous about being named by the committee, particularly as China is expected to become a rising focus ahead of the US election. Speaking recently at the University of California San Diego’s 21st Century China Center forum, one participant said the committee had “scared the hell” out of companies and was having an impact on investment decisions.
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