July 05, 2023

A Call for Overdue Action to Rein In Outbound Investment

As generative artificial intelligence experiences a period of massive acceleration, U.S. investors are capitalizing on this Cambrian explosion, funding not only domestic companies leading the AI race but also competing Chinese companies.

Indeed, evidence supports this cause for concern. From 2015 to 2023, 243 U.S. investors funded 474 Chinese AI companies with $40.29 billion through 760 investment deals. Similarly, between 2017 and 2020, U.S. firms were involved in 58 investment deals in China’s semiconductor industry, a trend that persisted in 2021 and 2022.

To solidify and expand this mechanism, executive action must be paired with decisive legislative action from Congress.

Far from being innocuous, these investments not only expose the magnitude but also underscore the crux of the issue: U.S. outbound investments come with a significant transfer of knowledge. American investors bring deep expertise and robust networks, which can prove a significant advantage for Chinese startups to reach scale, and undercut U.S. competitors.

In the coming weeks, the United States is slated to introduce an outbound investment screening regime, designed to restrict outflows of critical U.S. inputs that have fueled the technological and military advancement of strategic rivals.

Read the full article from Semafor.