US firms pumping billions into China’s AI sector

US investors were involved in at least 37% of all investment transactions in China’s artificial intelligence, or AI, sector between 2015 and 2021, according to a new report.

Georgetown University’s Center for Security and Emerging Technology found that $40.2 billion of the total money raised by all Chinese AI companies over this time period had US backing. However, the center couldn’t determine what percentage of that amount came from US investors or investors abroad.

The money went to 251 Chinese AI companies, and 91% of the US investment came as venture capital to earlier-stage businesses.

“Some of the largest investments include Goldman Sachs’ solo investment in 1KMXC, an AI-enabled robotics company, as well as an investment by three US-based [venture capital] firms in Geek+, an autonomous mobile robot company,” the report stated.

US investments in Chinese AI companies have undergone scrutiny in recent years as China seeks to use AI for not only civilian but also military applications. Analysts believe AI will play a central, “game-changing” role in China’s military innovation and future warfare strategy.

U.S. officials have also said Chinese espionage costs the U.S. upwards of $600 billion a year in stolen intellectual property.
US investments into China’s AI sector were especially valuable. While US investors participated in only 17% of all global transactions made, those transactions accounted for 37% of the total funding, the report found.

And even though US investments in China’s AI sector are small compared to those of Chinese investors, their benefits can have profound implications.

“While Crunchbase data suggests that US outbound investment into Chinese AI companies is limited, such financial activity, commercial linkages, and the tacit expertise that transfers from US-based funders to target companies in China’s booming AI ecosystem carry implications that extend beyond the business sector,” the report says. “Earlier stage [venture capital] investments in particular can provide intangible benefits beyond capital, including mentorship and coaching, name recognition, and networking opportunities. As such, US outbound investment in Chinese technology, and particularly AI, merits additional attention and tracking.”

The booth of Sensetime is pictured at the world Artificial Intelligence Conference in Shanghai, China, July 7, 2021.
Beyond potentially benefiting the military, another point of concern with US investments in the Chinese AI sector is the influence exerted on China-based companies by the ruling Communist Party.

Chinese companies “are required to establish CCP [Chinese Communist Party] cells in their operations and support CCP security agencies,” according to the China Task Force report, a major project conducted by members of Congress in 2020. “The CCP embeds its members in every company and organization.”

US officials have also said Chinese espionage costs the US upwards of $600 billion a year in stolen intellectual property.

* Article from: The New York Post