U.S. Firms Investing Billions of Dollars in China’s AI Sector: Report

At least 37 percent of all total investments were made by U.S.-based companies China’s artificial intelligence (AIA new report shows that the ) sector is expected to grow between 2015 and 2021.

The report (PDFThe Georgetown University Center for Security and Emerging Technology published a report (PDF) that found that $40.2 million in investments into Chinese AI companies were made with U.S. backing. However, it is not clear if any of those transactions were made by U.S. or foreign investors.

Venture capital (VC), was awarded to 251 Chinese companies that specialize in AI, principally at the seed, angel and pre-seed stages.

There are risks with such investments, the report noted, as they’re generally accompanied by other intangible benefits in which U.S. expertise is delivered to China-based companies.

“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,” According to the report.

“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 Chinese AI Companies Funded by Firms

U.S. investments in China-based AI companies have come under fire in recent years because of the amount of control exercised over such companies by China’s communist regime.

The Chinese Communist PartyCCPChina (ruled by the ) is a single-party state. It has passed numerous laws that require companies based in China to give all information to the regime upon request.

This means that any data or technologies developed by China-based companies with U.S. backing could be directly used by the CCP to improve upon its military capabilities, in line with the regime’s “military-civil fusion” strategy.

Moreover, such investments directly fuel China’s efforts to overtake the United States as the leading technological power.

This is demonstrated by the value of the investments being made by U.S. sources into China’s AI companies. Whereas investment transactions involving U.S. funding sources only made up 17 percent of the total number of transactions made, those transactions accounted for 37 percent of the total funding value of all such transactions, according to the report.

Notably, the U.S. investments also include major funding for Chinese companies whose research could tangibly benefit the Chinese military’s pursuit of 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,” According to the report.