Foreign Money Floods Silicon Valley as Trump Battles Chinese Influence over Tech World

The Associated Press
Chinatopix via AP, File

An article at Vox.com on Wednesday fretted about the amount of foreign money bubbling through Silicon Valley — particularly from the authoritarian regimes of China and Saudi Arabia — and offered a little backhand praise to the Trump administration for taking the problem seriously.

In a nutshell, Vox and its partners at Recode were deeply concerned about the amount of money Saudi Crown Prince Mohammed bin Salman is plowing into American tech firms, frowning as the heir to the Saudi throne frolicked with tech titans like Bill Gates and Tim Cook despite the death of Washington Post contributor Jamal Khashoggi at the hands of Saudi agents. The article castigated Silicon Valley for only briefly recoiling from those blood-soaked Saudi billions before returning to business as usual.

Brief mentions were made of big money rolling in from other quarters, including economic basket cases with repressive political systems and wealthy oligarchs such as Russia and Nigeria, before Vox found a ray of hope in the Trump administration’s determined opposition to the most troubling tech investor of all, China:

The debate around accepting money from China pits two opposing bedrock political beliefs about China against each other: Either China is a highly sophisticated US adversary coyly infiltrating Silicon Valley through communist-aligned actors who arrived here to steal intellectual property or it is just like any other foreign player seeking financial gains – but is being unfairly targeted by a belligerent government that stereotypes all Chinese actors.

Whatever the reality, the Trump administration’s posture toward China is having consequences. Quietly, over the past year, as many as a dozen China-linked firms have scaled back their US investment programs, some dramatically, Recode has learned, due to more aggressive behavior by a regulatory body called the Committee on Foreign Investment in the United States, or CFIUS.

The gist of the CFIUS saga is that Republicans led the charge to increase the power and resources of the agency after President Donald Trump talked up the danger posed by China and brought his “America First” philosophy to Washington.

The more muscular CFIUS is having a major effect on the tech world, whose biggest names love to virtue-signal in the media but had very little problem taking money from oppressive regimes until the federal agency began reviewing their deals with foreign governments more closely to protect “critical technology.”

Word is spreading through the tech industry that taking Chinese money has become more trouble than it is worth because even when approval is ultimately granted, the review process can grind on for months — an expensive delay in the fast-paced tech world. American tech firms that have not been completely scared away from doing business with the Chinese are beginning to drive harder bargains with them and take greater notice of the weird, intrusive demands Chinese firms often make of foreign partners.

Other foreign investments have come under scrutiny as well, but Vox went to some lengths to describe how Saudi investments have fared better than most others, in part because the massive SoftBank investment firm managed to create a little “distance” between itself and the Saudi royal family.

The notion of the Trump administration going easier on allies in Riyadh than adversaries in Beijing was referenced several times, although another obvious reason for different levels of scrutiny would be the Chinese predilection for technology theft, one of the most important issues the U.S. has been pressing them to address during trade negotiations.

A larger issue is hinted at throughout the discussion of foreign money in Silicon Valley: the spread of authoritarian politics through globalism. The tendency of Western social media companies to become more comfortable with authoritarian ideals due to sustained contact with repressive societies like China and Russia is just one highly visible aspect of the problem.

As the Vox article points out, it is getting harder to find truly “clean” money. Many of the most aggressive, deep-pocketed investors are linked to repressive regimes. The vaults of giant international firms have “blood money” mixed in with their stacks of relatively clean bills.

If U.S. tech firms develop the type of moral sensibility encouraged by activists, the most morally compromised investors will simply send their money elsewhere, and thanks to globalism, they have plenty of reasonable second choices if their plans to spend money in America are thwarted. We are moving past the era where the U.S. had enough tech and financial muscle to force other nations to keep their noses clean if they wanted a piece of the hottest investment action.

Besides the question of human rights offenses perpetrated by deep-pocketed authoritarians, there is the problem of their money emanating from financial systems incompatible with the American understanding of free-market democracy. Authoritarian regimes with tight grips on their populace and none of the Western world’s concerns about workers’ rights, environmental sensitivity, or income inequality have a cold-blooded edge over companies concerned about those things. State-run enterprises can bring a lot of pressure to bear against truly private corporations that are not backed by national treasuries.

China is currently experiencing some turbulence from workers tired of being treated like disposable drones. The Chinese Communist Party and its billionaire oligarchs respond to their complaints by reminding them China’s competitive edge depends on working people to death for limited compensation in a manner no Western firm could get away with.

Some of those repressive regimes have much better P.R. operations than others. The Vox article dwells at great length upon Saudi Arabia but only briefly mentions Qatar and its “checkered human rights record and support for terrorism.” Qatar is, in fact, a virtual slave state with political ties to some of America’s most aggressive enemies, and it has spent a fortune developing investment clout, lobbying muscle, and media influence in the United States. One benefit of this influence is that Qatar tends to be parenthetically mentioned at most when American media outlets fret about sinister foreign influence.

The Chinese government talks about globalism a lot, but it has taken ruthless steps to insulate itself from the kind of political and economic interference it plans to inflict upon others. Authoritarian regimes think globalism is a sucker’s game rigged in their favor, a game they can scarcely believe open societies are willing to play. The tougher CFIUS scrutiny described by Vox is a tiny fraction of the regulatory weight China, Russia, Saudi Arabia, or any other authoritarian regime is prepared to bring down upon foreign investors.

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