Chinese Investments in US Startups Drop Amid Wider Scrutiny of Tech Deals

Jeff Brody

Chinese-backed venture capital firms are closing U.S. offices, reducing their U.S. investments or changing the structure of their investments to avoid scrutiny from government regulators as U.S. startups shy away from Chinese investors amid rising tensions between the two countries, The Wall Street Journal reported Tuesday.

Research firm Rhodium Group said Chinese investments in U.S. startups hit record levels in early 2018 but started to drop in May 2018. Foreign direct investment from China also declined from $46 billion in 2016 to $5 billion in 2018, reflecting a 90 percent drop.

The decline in Chinese investments came after Congress passed a law expanding the authority of the Committee on Foreign Investment in the U.S. to assess foreign transactions and direct international investors to seek approval for technology deals. The report said a group of administration officials and senators started conducting meetings with U.S. tech executives and venture capitalists to inform them of the risks of having dealings with Chinese counterparts.

Sen. Mark Warner (D-Va.) said he supported broadening economic relations with China in the past. “But a few years and many, many classified briefings later, my views have changed, as the government in China has,” he said in a statement. The FBI has carried out briefings to warn companies of Chinese-backed intellectual property theft, economic espionage and cybersecurity threats, the report noted.

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