US venture capital firms feel pressure

China tech investments under probe as concerns aired over politicization

The United States' pressure on China's technology industry now includes a probe of its own venture capital firms that invest in Chinese tech companies.

GGV Capital, GSR Ventures, Walden International and Qualcomm Ventures are being investigated by the House select committee on China, led by US House Representative Michael Gallagher, a Wisconsin Republican.

The investigation, first reported by The Wall Street Journal, came as the administration of US President Joe Biden considers new rules that would restrict the flow of US investments in Chinese companies working on advanced semiconductors, artificial intelligence and quantum computing.

Gallagher, 39, said on Wednesday that the four firms, which received letters from the committee, are the panel's "initial targets".He said the probe will inform the committee's policy recommendations, including any requirements required by Congress to review outbound investment.

"There's no such thing as a truly private entity in China," Gallagher said. "Democrats and Republicans agree that we don't want to be fueling our own destruction."

The Chinese embassy in Washington responded: "The US has politicized and weaponized economic and technological issues, seriously violating the principles of market economy."

Twitter user Morten, whose profile says he is originally from Denmark but has lived in China for 27 years, called the move against the VC firms "the same nonsense over and over again".

He mimicked a common refrain used by China hawks is that "the issue is not with the Chinese people".

"Gallagher has absolutely no clue of what China is and what Chinese people think!" Morten wrote.

'Disgraceful'

Twitter user RC posted: "These China bashing politicians like Gallagher find it easier to bash other (countries) like China (than) do (their) job! Disgraceful."

The China committee, which was created earlier this year by House Speaker Kevin McCarthy, does not have lawmaking authority but has subpoena power. It is compiling a report about the US-China policy that will mainly focus on US business activity in the country.

The committee said in a letter to GGV that it is being targeted for investments in AI developers, including Megvii Technology, and semiconductor firms, Bloomberg reported. Qualcomm Ventures' investment in SenseTime Group was also mentioned by the committee, among others.

In 2019, Megvii and SenseTime were placed on the so-called Entity List, which bars them from doing business with US firms without Washington's approval.

Walden International was cited for its investment in chipmaker Semiconductor Manufacturing International, which is also on the US Entity List, Bloomberg reported.

The letters refer to recent research on outbound US investment by Georgetown University's Center for Security and Emerging Technology and request that the companies respond to questions by Aug 1, Bloomberg reported.

Gallagher said the probe is the first that the committee plans to conduct into the relationships between investors and the Communist Party of China.

A potential future target, Gallagher said, is Sequoia Capital, the Journal reported.

Sequoia, which has invested in TikTok owner ByteDance, has angered China hawks because of a series of Chinese tech investments made by its China unit.

After two years of scrutiny from Washington, Sequoia said in June that the firm would break up into independent units for the US, China and other areas.

Agencies contributed to this story.