U.S. mulls restricting Chinese investments into artificial intelligence companies

The United States is considering clamping down on Chinese investments into select Silicon Valley industries, such as machine learning and artificial intelligence.

With Chinese capital flooding into Silicon Valley the past few years, the move may hinder much-needed growth for startups in emerging technologies. But current and former U.S. officials believe the move is necessary to safeguard sensitive technologies critical for national security, according to Reuters who broke the story.

According to an unreleased Pentagon report, China has repeatedly gained access to sensitive technologies made in the United States by acquiring the companies via joint ventures, minority stakes and early-stage investments.

Twenty-nine investors from China have invested in U.S. artificial intelligence companies since the 2012, according to research group CB Insights.

The companies who received Chinese investments in its early stages are potentially considered off-limits to work with the Department of Defense.

The United States is considering giving the Committee on Foreign Investment in the United States (CFIUS), the governmental committee which reviews foreign acquisitions of U.S. companies on national security grounds, more power to stop “China’s predatory practices,” according to one Trump administration official.

The CFIUS is led by Treasury Department and includes nine permanent members, including representatives from the departments of Defense, Justice, Homeland Security, Commerce, State and Energy.

Senator John Cornyn (R-TX) is drafting legislation to give the CFIUS power to block technology investments. The bill would empower CFIUS to increase its scrutiny of buyers from nations considered potential threats to national security. It will also ask the Pentagon–with help from Silicon Valley and other departments–to identify what technology should be under CFIUS scrutiny.

The Chinese government pushed back American efforts to keep its investor capital away. “We hope the United States can provide a good environment for Chinese companies investing in the United States,” Chinese Foreign Ministry spokesman Lu Kang said on Wednesday.

The main technology of interest is artificial intelligence which can be used to aid military drone programs. Image recognition algorithms are an emerging hotspot in Silicon Valley, and market analysts note the companies working on them have seen a flood of interest from Chinese investors.

Defense Secretary Jim Mattis said in a Senate hearing on Tuesday that the CFIUS and the overall structure of handling foreign investments into U.S. companies working on sensitive technologies was “outdated.”

“It needs to be updated to deal with today’s situation,” said Mattis.

In the global race in artificial intelligence, many experts are beginning to believe China has pulled ahead of the United States, thanks to Beijing investing billions of dollars into research programs and initiatives.

China’s most popular search engine Baidu recently partnered with the Chinese government to create an artificial intelligence laboratory.

“It’s a race in the new generation of computing,” James Lewis, a senior fellow at the Center for Strategic and International Studies, told The New York Times. “The difference is that China seems to think it’s a race and America doesn’t.”

Photo: Defense Secretary Jim Mattis said in a Senate hearing on Tuesday that its handling of foreign investments into U.S. companies working on sensitive technologies was “outdated.”


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