For some years now, the United States and China have been engaged in a fierce trade war through which both seek to legitimize their economic power and make it clear to the world who is the world’s greatest power. Yet, curiously, the flow of Chinese capital to the United States, far from stopping or decreasing, has increased considerably during the last few years.

This reality generates concern for the United States national security, considering the number of reports that prove the growing infiltration of the communist regime in various scientific, academic, industrial, and even governmental organizations.

The regime’s infiltrations are aimed at stealing information, disseminating communist propaganda, crushing U.S. competition in certain areas, and other issues associated with harming the development of the West. 

One of the sectors where these investments have grown the most and, at the same time, the most problematic is the one associated with the Big Tech industry, specifically the investments directed to Silicon Valley.

In 2022 alone, at least $880 million from China in the form of “private capital” has been invested in the Silicon Valley technology industry, according to a report by the Foundation for Defense and Democracy (FDD).

The report entitled “The Weaponization of Capital” shows that, contrary to the belief that China is distancing itself economically from the United States, capital from the Asian giant continues to flow to numerous American firms. And also to Chinese firms with headquarters in the United States, as in the case of the controversial social network TikTok.

Venture investments and start-ups

Every country, including the United States, is eager to receive what in economics is called “risk investments.” 

These are essential capital outlays, generally private, oriented to certain ventures, projects, or ideas with a high risk of failure. Still, if they turn out to be successful, the returns are very high. Generally, these types of projects are known as Start-Up companies.

Start-ups are usually linked to the technological solutions industry and the development of cutting-edge technology, which is why the Chinese communist regime is particularly interested.

study published by Harvard Business School analyzes foreign capital investment in different American Start-Up companies from 1974 to 2015.

The report determines that while investment in these business models brought undisputed benefits to the economy, it also generated enormous risks of leakage of specific knowledge that maintains the U.S. competitive advantage over the rest of the powers.

While the United States has many more barriers than other countries to prevent the theft of knowledge and privileged information, the techniques of the Chinese regime’s intelligence apparatus have also demonstrated the ability to overcome these barriers and meet its hacking and data leakage objectives. 

The China Investment Corporation (CIC) is one of the investment funds closely watched by U.S. Homeland Security authorities. It is the world’s largest sovereign wealth fund with nearly $1 trillion in assets, which holds much of its capital thanks to direct contributions from the Chinese state apparatus. 

While it is more than attractive for any company to count on the support and backing of the CIC, in terms of security, it opens a big question mark.

Since the CIC was created in 2007, it has made up to 117 significant investments in U.S. capital, including partnerships with other sizeable Western investment firms, allowing it to facilitate its entry into the United States.

The theft of information

For some years now, the United States and China have been engaged in a fierce trade war through which both seek to legitimize their economic power and make it clear to the world who is the world’s greatest power. Yet, curiously, the flow of Chinese capital to the United States, far from stopping or decreasing, has increased considerably during the last few years.

This reality generates concern for the United States national security, considering the number of reports that prove the growing infiltration of the communist regime in various scientific, academic, industrial, and even governmental organizations.

The regime’s infiltrations are aimed at stealing information, disseminating communist propaganda, crushing U.S. competition in certain areas, and other issues associated with harming the development of the West. 

One of the sectors where these investments have grown the most and, at the same time, the most problematic is the one associated with the Big Tech industry, specifically the investments directed to Silicon Valley.

In 2022 alone, at least $880 million from China in the form of “private capital” has been invested in the Silicon Valley technology industry, according to a report by the Foundation for Defense and Democracy (FDD).

The report entitled “The Weaponization of Capital” shows that, contrary to the belief that China is distancing itself economically from the United States, capital from the Asian giant continues to flow to numerous American firms. And also to Chinese firms with headquarters in the United States, as in the case of the controversial social network TikTok.

US alarmed at China’s back-door approach to spying

Since the trade war between the United States and China was openly unleashed during the Trump era, the U.S. has begun a significant effort to replace Chinese imports of all items. Some with products manufactured in other countries and others through incentives to promote local manufacturing. 

In both Donald Trump’s administration and current President Joe Biden, the United States has sought to reduce economic dependence on the United States by limiting Chinese imports.

Such is the case with semiconductors, produced mainly in China and Taiwan. There are now significant incentives, agreements, and government support for local manufacturing. 

The Chip Act, which seeks to bring funding to U.S. semiconductor manufacturers, is an apparent attempt by the government to reduce dependence in a critical sector on Chinese manufacturers, who control much of global microchip manufacturing.

Among the regulations imposed by this new law, several restrictions on American semiconductor manufacturers are listed to prevent state-of-the-art technologies produced by them from reaching the hands of the communist regime.

Preventing imports of this type of product is intended to reduce the risk of theft of sensitive information by their manufacturers.

But according to the FDD report, the Chinese regime uses its sovereign wealth funds to invest in American capital and thus obtain this information from the inside, participating directly in the companies that produce and safeguard precisely this information and knowledge that they are trying to preserve.

In 2017, when the Chinese regime passed a law establishing that if the Chinese state security and intelligence agencies request from a company any information or data with which it operates, they must hand it over without pretext. This includes, of course, companies based in the United States or that trade with American clients.

The information in question can strategically put financial stress on particular business areas or give Chinese companies an advantage over American companies. 

The data can also be used for market research and industry insights, to create better artificial intelligence algorithms, or by going to extremes, can even steal DNA to develop biological weapons.

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