Tighten Monitoring Of Chinese Investments, Experts Tell HASC

WASHINGTON:  As China forges ahead trying to grab the head of the technology table by throwing money, policy and people at quantum computing and artificial intelligence, the US should carefully watch what companies China invests in or tries to buy.

Those were the conclusions of three of the top China and technology experts in Washington who appeared today before the House Armed Services emerging threats and capabilities subcommittee.

What are the stakes? The subcommittee’s new chairwoman, Rep. Elise Stefanik, put the case clearly:

“Many of China’s published National-level plans, such as achieving dominance in Artificial Intelligence by 2030, indicate a top-down, government-driven agenda that provides a road-map for strategic collaboration between industry, academia, and their civil society. These plans, when combined with resourcing, effort, and patience, may propel China to leap ahead in many of the technology sectors we will talk about today.”

Dean Cheng, one of the country’s top experts on the Chinese military, said the country may “need a new entity” to better monitor Chinese investments. The main body that now oversees foreign investments with national security implications is the Committee on Foreign Investment in the United States (CFIUS). Companies can ask CFIUS to review a transaction if they believe it might be needed, but the interagency committee has the power to review any merger, acquisition, or takeover “which could result in foreign control of any person engaged in interstate commerce in the United States.”

Cheng told the subcommittee a body may need to be created at the Securities and Exchange Commission (SEC) or similar body to ensure investments that may not result in overt control of a larger company, but could give the Chinese — or other foreign governments — great influence over the smaller companies that are often at the vanguard of technological research and development.

Paul Scharre, a defense technology expert at the Center for a New American Security, agreed “CFIUS reform probably makes sense,” given China’s aggressive push into US markets. He didn’t mention it, but the Intelligence Community concluded with “moderate confidence” that there “is likely a coordinated strategy among one more more foreign governments” to buy US companies involved in research involving critical technologies, according to the 2011 CFIUS report provided to Congress each year.

He suggested that we should lower the threshold for the size of investments and define “critical technologies that would trigger review.” That sounds a great deal like some of the counter-proliferation and arms control measures that were enacted during the Cold War, which many observers believe actually harmed US security interests by driving countries to buy from European countries with less restrictive views of what they should sell and to whom. Cheng cited this: “We do not want to kill that golden goose (of tech development),” he told the HASC, saying such an approach “could strangle as much as nurture new technologies.”

The third expert testifying today was William Carter, at the Center for Strategic and International Studies. He agreed with Cheng about the dangers of listing technologies, saying such a course could cripple America’s efforts to develop artificial intelligence and quantum computing, which both China and the Pentagon believe may be the keys to future military and economic dominance.