5 U.S.-based enterprise capital companies have participated in Chinese language government-backed entrepreneurial contests that successfully help Beijing’s “know-how switch” technique, in response to a Day by day Caller Information Basis evaluate of Chinese language-language contest information.
U.S.-based enterprise capital (VC) companies GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital and Walden Worldwide are variously recognized as “collaborating establishments” and/or “angel traders” in Chinese language government-backed “start-up” contests supporting the Thousand Skills Plan, in response to the competition’s brochures and promotional movies. Executives from these 5 VC companies have served as Thousand Skills Plan start-up contest judges, steering committee members and mentors for contestants going again to the primary 2012 contest, in response to a DCNF evaluate of contest information.
For instance, the primary contest’s web site identifies GSR Ventures’ co-founder, Sonny Wu, and IDG Capital’s international chairman, Hugo Shong, as steering committee members. The web site additionally lists GGV Capital’s managing companion, Jixun Foo, and Sequoia Capital’s international govt companion, Neil Shen, as judges. and mentors for contestants as together with Walden Worldwide’s managing director, Invoice Li.
“Launched in 2008, the Thousand Skills Plan incentivizes people engaged in analysis and improvement in the US to transmit the information and analysis they achieve right here to China in change for salaries, analysis funding, lab area and different incentives,” a employees report by the Senate Committee on Homeland Safety and Governmental Affairs mentioned in 2019.
In January 2022, Jeff Stoff, a former U.S. authorities analyst and linguist, warned the U.S.-China Financial and Safety Assessment Fee about how China is utilizing “start-up contests” to acquire U.S. know-how.
“A key ingredient of China’s know-how switch equipment are the tethers it has constructed to faucet into the R&D and innovation occurring contained in the U.S.,” Stoff testified in 2022. “Along with benefitting from casual analysis collaboration and partnerships with U.S. tutorial establishments described within the earlier part, China’s party-state deploys official and unofficial proxies; funding constructions comparable to enterprise capital funds, incubators and innovation facilities; start-up contests; expertise applications and supporting recruitment networks; and partnerships with diaspora organizations, at the least a few of that are a part of China’s United Entrance equipment generally and myopically considered by way of political affect operations.” (RELATED: EXCLUSIVE: CCP Officers Set Up Expertise Recruitment Program At US Agency Behind Taxpayer-Backed EV Battery Crops)
In July 2023, the Home Choose Committee on the Chinese language Communist Occasion (CCP) introduced it was launching “investigations into U.S. enterprise capital companies funding problematic PRC firms.” Chairman Mike Gallagher and Rating Member Raja Krishnamoorthi, the announcement mentioned, “despatched letters to 4 U.S. Enterprise Capital Corporations — GGV Capital, GSR Ventures, Qualcomm Ventures and Walden Worldwide — expressing critical concern and demanding details about the companies’ investments in Chinese language synthetic intelligence (AI), semiconductor and quantum firms within the Folks’s Republic of China (PRC).”
“Superior applied sciences — even when they begin out with an innocuous, shopper focus — will be built-in into the CCP’s techno-totalitarian surveillance state or into China’s army modernization,” Chairman Gallagher informed the DCNF. “In truth, that’s precisely what China’s coverage of military-civil fusion requires.”
“Whereas all 4 companies have begun producing data, we nonetheless have loads of unanswered questions,” Gallagher mentioned.
Not one of the VC companies focused by the Home committee have been accused of unlawful actions, nor have they been charged with any crimes.
‘I Have An Ambition To Switch My Achievements’
The Chinese language authorities launched its Thousand Skills Plan in 2008. 4 years later, the Thousand Skills Plan Enterprise Capital Middle and the Thousand Skills Plan Knowledgeable Affiliation collectively held the primary Thousand Skills Plan contest in 2012, the competition’s web site states.
The inaugural contest — known as the “East Sand Lake Thousand Skills Plan Begin-Up Contest” — shared its title with the Chinese language metropolis of Suzhou’s East Sand Lake, which is close to the Thousand Skills Plan Enterprise Capital Middle, in response to a brochure on the middle’s web site.
The Thousand Skills Plan’s contest “offers entrepreneurs the possibility to search out funding backing to determine firms in China,” in response to a 2021 Division of Protection (DOD) report regarding China’s state-sponsored know-how transfers.
The inaugural contest’s organizing committee was “composed of Thousand Skills Plan Enterprise Capital Middle and Thousand Skills Knowledgeable Affiliation representatives,” in response to the competition’s web site.
Along with executives from U.S.-based VC companies, executives from China-based VC companies with U.S. workplaces additionally served as judges and/or on the steering committee for the inaugural contest. This contains Sinovation Ventures‘ founder, Li Kaifu; Northern Gentle Enterprise Capital‘s founding managing director, Deng Feng; and Qiming Enterprise Companions‘ founding managing companion, Kuang Ziping, in response to the competition’s information.
Sinovation Ventures, Northern Gentle Enterprise Capital and Qiming Enterprise Companions didn’t reply to a number of requests for remark. Li, Deng and Kuang might additionally not be reached for remark.
The inaugural contest proceeded in a number of phases between April 2012 and March 2013, in response to the competition’s archived web site. Contestants first submitted enterprise plans, which then underwent preliminary analysis, earlier than the competition’s semi-finals and ultimate in-person competitors, the competition’s web site states.
Within the run as much as the finals, the judges evaluated contestants’ enterprise proposals and narrowed down a pool of at the least 400 candidates to 66 contestants, from which 20 finalists emerged, in response to the competition’s web site.
Throughout the March 2013 finals, contestants offered their enterprise proposals for six-minutes, earlier than a 10-minute question-and-answer session, with judges from the varied VC companies scoring the finalists’ initiatives and figuring out the winners, in response to the competition’s guidelines and procedures.
In the long run, the inaugural Thousand Skills Plan contest awarded first prize to a mission involving nanomedicine and tissue regeneration merchandise, in response to the competition’s web site. After the finals, the competition’s major web page featured a photograph of first prize being awarded to the winner who was recognized as Wen Xuejun, a professor within the Division of Chemical and Life Science Engineering at Virginia Commonwealth College.
“After profitable the championship, he obtained 10 million yuan ($1.6 million) in strategic funding from enterprise capital traders, in addition to 300,000 yuan in prize cash,” Chinese language state-run media outlet China Day by day reported a number of months after the finals.
Earlier than the competition, Wen’s U.S. lab had “mastered a core know-how to make collagen-coated medical catheters, that are extra proof against micro organism and value much less,” China Day by day reported. Wen informed China Day by day that he established Ryan Nanomedicine Co. Ltd. in Suzhou, as a result of “the price of commercializing the know-how within the U.S. would have been too excessive.”
“I’ve an ambition to switch my achievements within the lab into helpful medical merchandise, and I selected to comprehend this ambition in China, after cautious consideration,” Wen mentioned, in response to China Day by day.
A Virginia Commonwealth College spokesman referred press inquiries to Wen.
“Sure, Ryan Nanomedicine took half within the ‘Thousand Skills Plan Begin-Up Contest,’” Wen informed the DCNF through e mail, including that his start-up by no means really obtained any prize cash.
“Ryan nanomedicine received 300K (~$41K) for collaborating within the competitors to cowl the bills attending the competition,” Wen informed the DCNF. “However Ryan nanomedicine didn’t get 10 million yuan enterprise capital funding as a result of no funding firm was keen on investing Ryan nanomedicine. I felt we had been cheated by the competitors organizer.”
‘Overvalue Alternatives And Undervalue Dangers’
In 2019, the East Sand Lake Thousand Skills Plan Begin-Up Contest rebranded because the “Jinji Lake Thousand Skills Plan Begin-Up Contest,” taking its title from one other close by Suzhou lake. The competition, nevertheless, stays backed by the Chinese language authorities and administered by members of the Thousand Skills Plan Enterprise Capital Middle and the Thousand Skills Plan Knowledgeable Affiliation, in response to a evaluate of the competition’s web site.
Executives from GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital and Walden Worldwide have continued to take part within the Thousand Skills Plan’s contests since their 2012 inception, and members of every VC agency are listed on the competition’s 2023 roster, contest information present.
“These judges are doubtless in it for the connections and the cash that comes from the connections,” Dan Harris, a lawyer specializing in rising markets and the editor of China Regulation Weblog, informed the DCNF. “By collaborating, they’re aiming to be the primary particular person known as when these firms — or different Chinese language firms — search international funding.”
Nonetheless, sustaining a bullish funding strategy in the direction of China could also be financially dangerous “given the laundry listing of political, financial, safety and geostrategic dangers,” Steve Yates, senior fellow on the America First Coverage Institute and China Coverage Initiative chair, informed the DCNF.
“It really is exceptional that enterprise capital companies would proceed to overvalue alternatives and undervalue dangers in China,” Yates mentioned, citing the potential for battle within the Taiwan Strait and China’s obvious actual property bubble.
Far too few firms investing in China have sensible exit methods, Harris added.
“Getting the cash out has change into more and more troublesome,” he mentioned, “however this has not obtained a lot protection as a result of few wish to be considered as not having seen this coming.”
[Image created by the DCNF with pics from the Thousand Talents Plan website]
‘The Pursuits Of The State’
Though brochures and promotional movies for the Thousand Skills Plan’s contests determine GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital and Walden Worldwide as “collaborating establishments” and/or “angel traders” for the contests, it stays unclear with which contestants these VC companies might have invested, if any.
In July 2023, the Home Choose Committee on the CCP despatched a letter to GGV Capital stating that from “2015 to 2021, GGV Capital performed 43 funding transactions in PRC AI firms — greater than each different agency examined by the Middle for Rising Know-how in a latest research.”
“GGV,” the letter mentioned, “has invested in Megvii, which actively helps the surveillance of Uyghurs.”
The Treasury Division in 2021 recognized Megvii as “a part of the Chinese language Army-Industrial Advanced.”
For his or her half, Sequoia Capital and Walden Worldwide have each invested in Chinese language drone producer DJI, in response to the funding portfolios on the VC agency’s web sites. The Treasury Division recognized DJI as “a part of the Chinese language Army-Industrial Advanced” in 2021.
GSR Ventures, IDG Capital and Sequoia Capital have likewise invested in Chinese language AI chip producer Horizon Robotics, in response to Horizon Robotics’ web site. In 2021, the Division of Protection recognized Horizon Robotics as a “Chinese language Army Firm.”
In June 2023, Sequoia Capital China was split-off from Sequoia Capital’s major operations, in response to Nikkei Asia. Regardless of this break up, Sequoia Capital China’s web site and the 2023 Thousand Skills Plan contest steering committee roster determine Neil Shen as each Sequoia Capital’s “international govt companion” in addition to Sequoia Capital China’s “founder and govt companion.”
GGV Capital, GSR Ventures, IDG Capital, Sequoia Capital, Sequoia Capital China, Walden Worldwide and their executives didn’t reply to a number of requests for remark.
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