WASHINGTON—The United States appears poised to heighten scrutiny of Chinese investment in Silicon Valley to better shield sensitive technologies seen as vital to U.S. national security, current and former U.S. officials tell Reuters.
Of particular concern is China’s interest in fields such as artificial intelligence and machine learning, which have increasingly attracted Chinese capital in recent years. The worry is that cutting-edge technologies developed in the United States could be used by China to bolster its military capabilities and perhaps even push it ahead in strategic industries.
The U.S. government is now looking to strengthen the role of the Committee on Foreign Investment in the United States (CFIUS), the interagency committee that reviews foreign acquisitions of U.S. companies on national security grounds.
An unreleased Pentagon report, viewed by Reuters, warns that China is skirting U.S. oversight and gaining access to sensitive technology through transactions that currently don’t trigger CFIUS review. Such deals would include joint ventures, minority stakes, and early-stage investments in startups.
Defense Secretary Jim Mattis weighed into the debate on June 12, calling CFIUS “outdated” and telling a Senate hearing, “It needs to be updated to deal with today’s situation.”
CFIUS is headed by the Treasury Department and includes nine permanent members, including representatives from the departments of Defense, Justice, Homeland Security, Commerce, State, and Energy.
James Lewis, an expert on military technology at the Center for Security and International Studies, said the U.S. government is playing catch-up.
“The Chinese have found a way around our protections, our safeguards, on technology transfer in foreign investment. And they’re using it to pull ahead of us, both economically and militarily,” Lewis said.