A congressional investigation has determined that five U.S. venture capital firms invested more than $1 billion in China's semiconductor industry since 2001, fueling the growth of a sector that the U.S. government now regards as a national security threat.
Funds supplied by the five firms — GGV Capital, GSR Ventures, Qualcomm Ventures, Sequoia Capital and Walden International — went to more than 150 Chinese companies, according to the report, which was released Thursday by both Republicans and Democrats on the House Select Committee on the Chinese Communist Party.
The investments included roughly $180 million that went to Chinese firms that the committee said directly or indirectly supported Beijing's military. That includes companies that the U.S. government has said provide chips for China's military research, equipment and weapons, such as Semiconductor Manufacturing International Corp., or SMIC, China's largest chipmaker.
The report by the House committee focuses on investments made before the Biden administration imposed sweeping restrictions aimed at cutting off China's access to U.S. financing. It does not allege any illegality.
In August, the Biden administration banned U.S. venture capital and private equity firms from investing in Chinese quantum computing, artificial intelligence and advanced semiconductors. It has also imposed worldwide limits on sales of advanced chips and chipmaking machines to China, arguing that these technologies could help advance the capabilities of the Chinese military and spy agencies.
Since it was established a year ago, the committee has called for raising tariffs on China, targeted Ford Motor Co. and others for doing business with Chinese companies, and spotlighted forced labor concerns involving Chinese shopping sites.
The report recommended that Congress curb investments in all Chinese entities that are subject to certain U.S. trade restrictions or included on federal "red flag" lists, as well as their parent companies and subsidiaries. That would include companies that work with the Chinese military or have ties to forced labor in China's Xinjiang region. The U.S. government should also consider imposing controls on other industries, the lawmakers said.
Walden did not respond to a request for comment. A representative from GSR declined to comment. GGV provided a list of corrections and clarifications to the report and stated that it had been in compliance with all applicable laws.
A Sequoia spokesperson said the firm always had processes in place to ensure compliance with U.S. law.
A Qualcomm spokesperson said its investments were small compared with those of the venture capital firms.