TikTok aside, Congress has its eye on the U.S. money going into China

BEIJING
—
The
U.S.
Congress
increasingly
has
its
eye
on
American
capital
that’s
allegedly
funded

China’s
military
development,
indicating
that
greater
scrutiny
on
U.S.
investments
into
China
may
outlast
presidential
terms
and
become
part
of
law.

After
a
few
false
starts
in
2023
that
never
ended
up
blocking
U.S.
investments
into
certain
Chinese
industries,
some
in
the
House
of
Representatives
are
still
pushing
ahead.

“I
do
think
Congress
needs
to
step
up
and
legislate
an
enduring
solution
to
this
problem,
because
otherwise,
we’re
going
to
ping
pong
back
and
forth
between
different
administrations
and
different
executive
orders,
or
different
regulators
saying
different
things,”
Mike
Gallagher,
chairman
of
the
House
Select
Committee
on
the
Strategic
Competition
Between
the
United
States
and
the
Chinese
Communist
Party,
said
in
a
statement
to
CNBC
this
week.

“I
think,
at
least
in
advanced
technology
sectors,
we
need
to
cut
off
the
flow
of
funds.
We
can’t
afford
to
keep
funding
our
own
destruction,”
said
Gallagher,
who
is
also
chairman
of
the
House
Armed
Services
Subcommittee
on
Cyber,
Information
Technologies,
and
Innovation,
and
on
the
Permanent
Select
Committee
on
Intelligence.

The
House
Select
Committee
on
the
CCP,
established
in
January
last
year,
led
the
legislative
act
to
essentially
ban
TikTok
in
the
U.S.
if
its
Chinese
parent
ByteDance
doesn’t
sell
the
popular
social
media
app.
The

bill
passed
the
House
last
week,
and
now
must
pass
the
Senate
if
it
is
to
become
law.

The
House
select
committee
in
February
also
published
a
report

alleging
U.S.
venture
capital
firms
invested
billions
“into
PRC
companies
fueling
the
CCP’s
military,
surveillance
state
and
Uyghur
genocide.”

It
is
unclear
how
aware
U.S.
firms
were
of
such
links,
if
any.
Beijing
has
denied
accusations
of
genocide.

Similar
research
detailing
the
links
between
U.S.
capital,
venture
firms
in
China
and
Chinese
tech
startups
has
started
making
its
rounds
in

major
media
outlets
since
late
2023.

The

study
was
produced
by
“Future
Union,”
which
describes
itself
as
a
“bipartisan
advocacy
organization
designed
to
fuse
private
sector
capitalism
and
forward
thinking
leaders
to
address
a
new
wave
of
emerging
technology
and
security
challenges
facing
the
U.S.
and
its
allies.”

“In
order
to
ensure
that
those
competing
and
leading
technologies
have
the
opportunity
to
excel,
capital
is
a
critical
element,”
the
report
said.
“As
such,
we
need
to
return
to
a
level
of
accountability
and
fidelity
to
the
rule
of
law
that
made
our
capital
markets
and
private
sector
the
envy
of
the
global
system.”

Future
Union
also
published
a
list
of
what
it
considers
the
top
venture
investors
in
technology
and
defense
that
are
“advancing
America’s
interest
through
explicit
action.”

Little
else
about
the
advocacy
group’s
background
is
publicly
available,
except
for
its
executive
director,
Andrew
King,
who
said
in
an
interview
with
CNBC
he
solely
funded
the
group.

“We
have
not
taken
money
from
any
outside
groups.
It’s
a
bipartisan
group.
I’m
the
one
that
can
be
public,
but
there
aren’t
any
vested
interests,”
he
said.
“Nobody
is
seeking
to
make
money
off
this.”

“It’s
just
people
…
that
have
sort
of
seen
the
economics
play
out
and
the
abuse
and
use
exploitation
of
the
of
the
private
markets
[that
have]
sort
of
cost
us
a
generation
of
technology,”
said
King,
who
is
also
managing
partner
at
venture
capital
firm
Bastille
Ventures
in
San
Francisco.

So
far
it’s
been
difficult
for
the
U.S.
government
to
pass
sweeping
restrictions
on
investments
in
China,
although
being
tough
on
Beijing
has
been
touted
as
a
rare
area
of
bipartisan
agreement.

The
Senate
in
July
overwhelmingly
passed
a
bill
that
would
have
required
U.S.
investors
in
advanced
Chinese
technology
to
notify
the
Treasury
Department.
While
that
was
a

toned-down
version
of
earlier
proposals
that
would
have
restricted
such
investments,
the
legislation
did
not
pass
the
House.

The
Biden
administration
in
August
issued
an

executive
order
aimed
at
restricting
U.S.
investments
into
semiconductor,
quantum
computing
and
artificial
intelligence
companies
citing
national
security
concerns.
Treasury
was
tasked
with
implementation
after
a
public
comment
period.
No
further
details
have
yet
been
released.

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
restrict
investments
in
hypersonics
and
high-performance
computing.

It’s
unclear
whether
or
when
those
proposals
will
become
law.

When
Biden’s
executive
order
was
released,
China’s

Ministry
of
Commerce
called
upon
the
U.S.
to
“respect
the
market
economy
and
the
principles
of
fair
competition”
and
to
“refrain
from
artificially
hindering
global
trade
and
creating
obstacles
that
impede
the
recovery
in
the
global
economy.”

China’s
National
Financial
Regulatory
Administration
did
not
immediately
respond
to
a
request
for
comment
on
this
story.

King
said
he
expects
U.S.
firms
will
need
to
notify
Washington
about
investments
into
China
related
to
quantum
computing
and
artificial
intelligence,
but
not
much
more.

“I
think
the
transparency
element
is
most
definitely
still
on
the
horizon,”
he
said.
“And
I
think
that
will
happen.
I
would
be
surprised
if
that
didn’t
happen
through
before
the
middle
of
the
year.”

“I
don’t
think
there’s
the
appetite
for
getting
enough
of
Congress
on
both
sides
to
step
up
[in
a]
meaningful
way
to
have
hard
restrictions
because
there’s
a
lot
of
entrenched
interests,”
he
said,
without
elaborating.
He
noted
that
legislation
is
focused
more
on
companies
with

military
industrial
ties,
or
connections
to
sanctions,

entity
lists
or

export
controls.

In
addition
to
putting
specific
Chinese
companies
on
blacklists,
the
U.S.
Department
of
Commerce
has
in
the
last
two
years
announced
sweeping
restrictions

aimed
at
blocking
China’s
access
to
advanced
semiconductor
technology.

While
U.S.
institutional
investment
into
China
has
largely
paused
due
to

uncertainty
about
regulation
and
growth,
King
said
that
once
China
gets
through
its
own
economic
cycle,
“I
fully
expect
that
to
be
a
lucrative
market.”

“A
lot
of
large
asset
managers
and
investment
managers
that
are
global
in
nature,
or
want
to
have
a
bigger
footprint
in
China,
[they]
do
not
want
to
lose
their
optionality
to
be
able
to
plan
for
[both]
sides
of
that
divide,
regardless
of
how
it
works
out,”
he
said.