China's tech power grab should ring White House alarm bells

China is chasing the US’s tail in the hunt for tech talent

US president Donald Trump has, as on many topics, been pretty vocal about China. In typically understated fashion he claimed on the campaign trail that the world’s second biggest economy has manipulated its currency in the past to make exports more competitive. Or, in his own words: “We can't continue to allow China to rape our country, and that's what they're doing.” Now, notwithstanding the fact that most presidential candidates talk tough on China before dialling back the rhetoric once inside the Oval Office, there are things happening closer to home that President Trump would be better advised to focus on.

Last month, Microsoft lost one of its top artificial intelligence (AI) experts to Chinese rival Baidu. While perhaps not remarkable in itself, it is symptomatic of a worrying trend for the US: that the nation could be losing out in a field vital to the commercial prosperity of its technology industry and the long-term strength of its military.

These are concerns not helped by the presence of a Baidu R&D centre in Silicon Valley, and of Beijing-linked VC firms wielding increasing influence in the tech heartland of America. So what’s the new commander-in-chief going to do about it?


The power of AI

Qi Lu’s defection to Baidu to become the search giant’s new COO is not surprising. The firm has been investing serious sums in artificial intelligence in a bid to become a global leader. What has been surprising, however, is its establishing an AI Laboratory in Sunnyvale. The firm is now on a major hiring spree – presumably peeling off some of the country’s top grads in the process. That in itself should be a concern for a president hell-bent on making America ‘great’ again.

But there are other implications. Artificial intelligence is increasingly being used in military applications. In fact, the US Navy has been testing a Long Range Anti-Ship Missile said to harness the technology to help it avoid enemy defences. China is already looking to match these capabilities, according to the New York Times. This is a concern for the Pentagon, given the close links between China’s private businesses and the state. Suspicion of these links have in the past led to lawmakers banning Huawei and ZTE from competing in the US telecoms infrastructure market. 

Last autumn, a US government report claimed the number of studies published by Chinese scientists referencing “deep learning” exceeded those produced by their American counterparts. As if that weren’t concerning enough for the White House, Chinese government-backed VC firms are now putting serious sums of cash into funding Valley start-ups, according to The Information. It claimed:

“The funds typically don’t advertise their links to Chinese government agencies. Complicating the picture, they have a bewildering array of corporate structures connecting them to the government. What’s clear is that their limited partners are all either state-owned enterprises or government entities, whose funding is dependent on following Chinese government policy.”

The funds are also being matched by the likes of Chinese web giants Tencent, Alibaba and others. It isn’t all about AI, of course. But it’s happening on a big enough scale to cause a few furrowed brows in the Pentagon and the boardrooms of Silicon Valley.


Time for change?

These concerns are part of the reason why a group of US Congressmen last year wrote to the Government Accountability Office (GAO) asking to increase the scope of the Committee on Foreign Investment in the United States (CFIUS). This is the body that traditionally investigates the national security implications of any M&A deals involving foreign firms.

It urged the GAO to consider:

Does the scope of the CFIUS review capture Chinese angel/venture capital funds being established in the US or Chinese investment in tech accelerators and incubators. Is there reason to believe it should?

Whether the new leader of the Western world decides to make this part of his mission to revive the fortunes of a superpower on the wane remains to be seen. In the nearer term the Pentagon would do well to try and rebuild trust with Silicon Valley and its smartest computer scientists. That relationship has been decidedly frosty ever since Edward Snowden exposed the true scale of government surveillance in the US. 


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