Some in Washington Wary as Silicon Valley Welcomes Chinese Investments

While the Trump administration is putting tariffs on Chinese imports, another battle has been brewing about whether the United States should block Chinese investments in some U.S. companies that work in artificial intelligence (AI), robotics and other key technology.

Some of these technologies have U.S. national security implications, argues the Department of Defense in a report on growing Chinese ties to U.S. firms. Lawmakers in Washington are considering expanding a Treasury Department review process that looks at investments from foreign entities.

“I assure you that the threat China poses is real and that the dangers we worry about are already taking effect,” said Sen. John Cornyn, a Texan Republican, who is sponsoring the Foreign Investment Risk Review Modernization Act, the bill that would strengthen the review.  “Our inaction can only have negative consequences, and we need to aim to prevent any future negative consequences to our country.”

Limiting Chinese investments has to be done thoughtfully, said Jeff Moon, an international trade and government affairs consultant and a former assistant U.S. trade representative.

“The biggest problem I see is just vagueness when we talk about Chinese investment,” Moon said. “Are we talking about any Chinese national that’s dropping a penny into the American economy?”

View from Silicon Valley

In Silicon Valley, there is some relief the Trump administration appears to have backed away from a plan to block investment into AI or other technologies in the United States by a company with more than 25 percent Chinese ownership.

While the national security concerns are legitimate, tech firms and investors don’t want to see “policies that take some kind of a sledgehammer approach to investment, which by and large from China here has been beneficial,” said Sean Randolph, senior director of the Bay Area Council Economic Institute.

“How concerned should we be about these different sources of leakage, if that’s the term,” Randolph said. “What is an appropriate way to address that as opposed to ways that would try to address it, but that actually end up having a very negative effect on the economy here and in the U.S. economy, and the Chinese economy, too?”

Collaboration valued

Recently, Silicon Valley held its first U.S.-China summit on AI technologies with a focus on how to better collaborate between the two nations.

“The technology is shared and collaborative and better for humankind. I don’t think it’s one country against another country,” said Tao Wang of SAIC Capital.

Helen Liang, managing partner of FoundersX, a venture capital firm, said entrepreneurs and companies in AI are focused on how to tackle big issues, such as health care, transportation and work.

“Regardless of the geopolitical pressure or differences, from a technology perspective we are looking to solve society’s problems,” said Liang, whose firm helps startups it invests in with business relationships in China.  

‘Disruption’ from both countries

Nicolas Miailhe, president of The Future Society, a nonprofit research group, said any limits on investment from China to the United States could also slow down U.S. innovation.

“We have been used to disruptive business models emerging from the Silicon Valley here. This is changing,” Miailhe said. “We are now in FinTech for example seeing new and disruptive business models emerging from China.”

“Disruption” is a favorite term in Silicon Valley, describing how new technologies can lead to dramatic and unpredictable results on an industry.

That potential is what excites these entrepreneurs – and worries some lawmakers back in Washington.

 
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