Chinese flag binoculars looking at British and U.S. flags
Illustration: Christopher T. Fong/Protocol

US investors bet on China despite government warnings

Protocol Policy

Hello, and welcome to Protocol Policy! Today we examine U.S. investors’ apparent confidence in China’s tech sector; look at the Irish Data Protection Commission, which is moving forward with a data requirement that Meta says would push it out of Europe; and try to figure out the Truth (Social) behind President Trump’s status on the board of Trump Media and Technology Group.

VC's China gamble

Parts of the U.S. government are trying to send a clear message: The economies of the U.S. and China are disentangling, and investment flows should be redirected accordingly.

  • Congress could give the federal government authority to block investments in China’s tech sector. Bipartisan coalitions in both the House and Senate agreed on a bill provision that would let the federal government block investments in Chinese companies operating within sensitive technology areas such as artificial intelligence, biotechnology, quantum computing, large-capacity batteries, financial technologies and autonomous systems. While that bill hasn’t been written into law yet, it’s possible it could be tacked onto the U.S. competition bill that Democrats want to pass after recess.
  • Intelligence agencies sounded the alarm about China stealing U.S. tech secrets. Earlier this week, the FBI and MI5 issued a joint warning for tech companies to be wary of China stealing technology.
  • FBI Director Christopher Wray didn’t mince words at the press conference on Wednesday: “The Chinese government is set on stealing your technology — whatever it is that makes your industry tick — and using it to undercut your business and dominate your market.”
  • This message has been coming from intelligence communities for years now — and it’s worth noting that such broad claims can stoke workplace discrimination and cut off a crucial flow of high-skill tech talent.

A blockbuster VC funding round shows investors aren’t taking that message seriously. Amid all the bluster from the U.S. government, Sequoia Capital China raised $9 billion to fuel four new funds, amassing what could be the largest pool of capital ever directed toward China's technology sector.

  • Much of that capital came from U.S. institutional investors, with university endowments and pension funds betting their future returns on China.
  • In case you had any doubts about investors’ bullishness on China: The new funds were 50% oversubscribed, which means investors were ready to commit more than $12 billion to Sequoia Capital China, The Information reported.
  • The funds don’t seem to be avoiding “sensitive” technology sectors, either. Sources familiar with the deal told Bloomberg that funds will be split between health care, technology startups and consumer startups.

Investors are betting we’re too reliant on China to meaningfully break ties. In 2021, the U.S. set a new record for imports, with China leading the world in selling goods to Americans. In fact, China sold around $506 billion worth of goods to the U.S. last year, more than the combined value of goods imported from Japan, Germany, India, South Korea and the United Kingdom.

  • We also still seem to rely on China for critical emerging sectors of the economy, such as solar energy. In June, President Biden invoked emergency authority to grant Southeast Asian solar suppliers a clear path to export to the U.S. The Commerce Department had been investigating those firms for ties to China, following reports that 70% of that equipment value ultimately flowed back to China.
  • The Biden administration is also considering rolling back Trump-era tariffs against China to help combat inflation, according to The Wall Street Journal. Those tariffs were put in place in 2018, in part as a response to allegations that China had engaged in unfair technology transfer and intellectual property practices.

China presents a major policy threat to Western investors. Wall Street probably remembers when the Chinese government stepped in to halt the highly anticipated IPO of Ant Group — or, for that matter, when Chinese regulators launched a probe against NYSE-traded DiDi that precipitated a 84% decline in its stock value. More formally, China has been preparing a blacklist that would limit Western cash from flowing into tech firms in sensitive industries. To spot the policy wild card, then, U.S. investors need to look beyond D.C.

— Hirsh Chitkara (email | twitter)

In Washington

Sen. Chuck Schumer is trying to rally support for semiconductor subsidies. The Senate Democratic leader is planning a classified briefing for the entire Senate on the state of global chipmaking competition. The competition bill that includes subsidies for semiconductors still needs to be reconciled between the House and Senate versions.

The Biden administration is weighing measures to slow China’s largest chipmaker. The Commerce Department wants to ensure the sanctions target SMIC without further hampering the global supply of chips, which is easier said than done. The measures would focus on limiting exports for chipmaking tools, per Reuters.

Two data brokers agreed to stop selling sensitive data around abortion visits. Sen. Elizabeth Warren announced that both SafeGraph and committed to not share that data in response to her request.

A pro-union group wants the SEC to investigate Amazon over warehouse injury claims. The Strategic Organizing Center alleges Amazon’s 2021 letter to shareholders understated warehouse injury rates, which led BlackRock to vote against a related shareholder proposal. Amazon said there’s “no merit” to the allegation.


How to build an equitable and inclusive future: At the same time that the pandemic demonstrated all that is possible in an interconnected world, we saw in new and increasingly stark ways how certain communities continue to be marginalized and harmed by a persistent digital divide and how effectively that divide exacerbates our society’s other inequities.

Read more from Trusted Future

In the courts

A former asset manager for Celsius is taking the company to court in New York. KeyFi alleges it was not paid for work performed for Celsius and that the lender mismanaged customer funds.

Parents are suing TikTok for allegedly promoting the deadly “blackout challenge” to children. In a Los Angeles Superior Court, the two sets of parents said TikTok bears responsibility for the tragic deaths of their children, ages 8 and 9. The lawsuit also alleges TikTok didn’t warn parents about the addictive and dangerous nature of the app.

On Protocol

The Consumer Financial Protection Bureau is hiring tech talent to investigate Big Tech. As the CFPB looks to hold tech accountable for financial missteps, it wants to hire 25 technologists over the course of the coming year to probe new leads.

A threat intelligence firm suggests China is behind a social media campaign to oppose rare earth metal mining in the U.S. The firm, Mandiant, identified campaigns written under the guise of locals being outraged over plans to construct processing sites in places such as Texas.

Around the world

The Irish Data Protection Commission could force Meta out of the EU. It drafted legislation on Thursday that would require Meta to keep user data in Europe rather than send it to servers in the U.S., where intelligence agencies have access. Meta has warned that it would suspend some services in Europe in response to such a decision. However, approving the measure would require approval from regulators across 26 EU member states, and that means it’s unlikely to coast through to the finish line.

India is accusing Chinese smartphone vendors of cheating taxes. The Indian Enforcement Directorate claimed Vivo shifted earnings abroad to reduce its taxes in India. The Chinese embassy spokesperson said the repeated investigations would “chill the confidence and willingness of market entities from other countries, including Chinese enterprises, to invest and operate in India.”

In the C-suite

Government filings suggest President Trump left Truth Social’s board. Documents submitted to the Florida Department of State's Division of Corporations in June show Trump departed the board alongside Donald Trump Jr. just before the company received federal subpoenas investigating the SPAC. The company insisted, however, that Trump was still the board’s chairman, and refused to further explain the apparent discrepancy.

Snap hired the director of the Secret Service. James Murray retired from his government post to join Snap, where he’ll work on employee safety. Seems like overkill, but hey, Big Tech is ready to spend a lot on C-suite security: Meta reportedly spent $26.8 million on security for Mark Zuckerberg and his family in 2021.

In data

More than a third: That’s the proportion of people in the U.S. who say they’re EV-curious, according to a new survey commissioned by Consumer Reports. The survey found 14% of the population would “definitely” buy or lease an EV, while 22% would “seriously consider” it. At the moment, only 2% of the population owns an EV. The White House wants half of vehicles sold in the U.S. to be electric by 2030.


How to build an equitable and inclusive future: There is so much more we need to do to make sure our future is more equitable and inclusive and maximizes America’s potential. It is not enough just to ensure everyone is connected. We also need to extend the full scope of digital opportunity to the people, the communities, and the institutions.

Read more from Trusted Future

Better loved than feared?

Does anyone scare Henry Kissinger? Apparently Elizabeth Holmes once did, according to a recent interview by Maureen Dowd. “When I go to board meetings, I feel like I have to ask permission to go to the bathroom,” Kissinger, who served on the board of Theranos, reportedly told Dowd. Kissinger added: “We were all afraid of her.”

Thanks for reading — see you Monday!

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