US Firms Investing Billions Of Dollars In China’s AI Sector: Report

According to a report, US firms are investing billions of dollars into China’s AI sector, and there are dangers associated with these investments because they sometimes come with other intangible benefits that involve transferring American skills to Chinese-based businesses.

US Firms Investing Billions Of Dollars In China's AI Sector: Report 1

A recent study found that between 2015 and 2021, American businesses participated in at least 37% of all investment transactions in China’s artificial intelligence (AI) industry.

It was not apparent how much of the $40.2 billion in investment transactions into Chinese AI companies came from American or foreign investors, according to the Georgetown University Center for Security and Emerging Technology’s report (pdf below), which determined that China received U.S. support in those transactions.

251 Chinese AI firms received venture funding (VC), largely at the angel, seed, and pre-seed rounds of investment.

According to the research, there are dangers associated with these investments because they sometimes come with other intangible benefits that involve transferring American skills to Chinese-based businesses.

“While Crunchbase data suggests that U.S. outbound investment into Chinese AI companies is limited, such financial activity, commercial linkages, and the tacit expertise that transfers from U.S.-based funders to target companies in China’s booming AI ecosystem carry implications that extend beyond the business sector,” the report states.

“Earlier stage VC investments in particular can provide intangible benefits beyond capital, including mentorship and coaching, name recognition, and networking opportunities. As such, U.S. outbound investment in Chinese technology, and particularly AI, merits additional attention and tracking.”

US Firms Fund Chinese AI Companies

Due to the extent of the communist state in China’s influence over these businesses, recent U.S. investments in Chinese AI firms have drawn criticism.

China is ruled by the Chinese Communist Party (CCP), a one-party state, and has passed a number of regulations requiring businesses with headquarters there to provide the government with access to all information they hold upon request.

According to the CCP’s “military-civil fusion” plan, this means that any information or technology generated by Chinese enterprises with support from the United States could be directly exploited by the CCP to enhance its military capabilities.

Furthermore, these investments directly support China’s attempts to surpass the US as the world’s dominant technical power.

According to the former Pentagon software chief, the US has already lost the AI War to China. The former software chief also sounded the alarm over the cyber defenses of US government agencies, saying that they were at “kindergarten level” in some areas.

The value of the investments being made by American sources into Chinese AI startups serves as evidence of this. Despite making up only 17 percent of all transactions, investment transactions involving U.S. financing sources accounted for 37 percent of the overall funding value of all such transactions, the survey found.

Notably, considerable money from U.S. investments also goes to Chinese businesses whose research could directly advance Chinese military efforts to develop AI and autonomous systems.

“Some of the largest investments include Goldman Sachs’s solo investment in 1KMXC, an AI-enabled robotics company, as well as an investment by three U.S.-based VC firms in Geek+, an autonomous mobile robot company,” the report states.

Read the report given below:

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