November 21, 2019 11:03 AM RSS

Chinese Venture Capitalist, Kai-Fu Lee, Threatens Future Investments in the United States

  • Wall Street Rebel | James DiGeorgia
  • 11/16/2018 10:17 PM
Chinese Venture Capitalist, Kai-Fu Lee, Threatens Future Investments in the United States


The growing dissatisfaction among Chinese investors reflects a common belief that President Trump is determined impossible for Chinese investors to risk their capital in the United States.

 


By James DiGeorgia

One of the most prominent Chinese venture capitalist and former president of Google China and multi-billionaire Kai-Fu Lee during an interview with Bloomberg at the CEC Capital Summit, an annual event in California hosted by a Beijing investment bank made it clear...

Alt [Picture: Kai-Fu Lee]“We don’t have to invest in the U.S.” making it clear if relations between the United States and China continue to deteriorate further his investment firm may scale back in the U.S.

Kai-Fu Lee, the chairman, and chief executive officer of Sinovation Ventures, said his firm would instead of investing in the United States instead start focusing instead on luring talent away from the United States. The direction of his firm and other Chinese Venture Capitalists would hinge on what occurs during the planned meeting between Chinese President Xi Jinping and President Donald Trump when they meet to discuss trade at the G20 summit in Buenos Aires…

“Our U.S. strategy is pending on the Argentina meeting, to see if there is a U.S. strategy”

Founded in 2009, Sinovation Ventures was one of the very first Chinese Venture capital firms to establish itself in the United States. Other global Venture Capital firms like Sequoia Capital and GGV Capital, have found great success in offering start-up business and entrepreneurs with the needed bridge between the world’s two largest economies.

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Sinovation Ventures has about $2 billion under management spread among six funds capitalized with the U.S. and Chinese funds. The venture capitalist firm is invested in over 300 companies, most of which are located in China. Yet, the financial impact of Sinovation pulling out of the investing in the U.S. would do little damage to the firm...

“Ninety-five percent of our past money was invested in China, so that could easily be 98 percent or 100 percent if that’s what it takes…We may end up with two internets. We may end up with two sets of AI. We may end up with two sets of internet governance principles.”

The growing dissatisfaction among Chinese investors reflects a common belief that President Trump is determined impossible for Chinese investors to risk their capital in the United States. They are fully aware of the Trump administration’s efforts to block or delayed deals, large and small, between the U.S. and Chinese tech companies. This is reflected in the reality that Chinese acquisitions and investments fell to the lowest level in seven years, a drop of 92 percent, according to Rhodium Group, a global economic and policy research firm in the first 5 months of 2018.

In August, the GOP controlled Congress gave the Treasury Department the authority to strengthen the Committee on Foreign Investment in the U.S., or CFIUS, an inter-agency panel that monitors cross-border Chinese and U.S. business transactions for national security risks. Under new rules, even a small investment can be flagged for CFIUS review. This will mean huge legal and administrative costs that were never figured in the expected cost of doing business in the United States and will discourage future investment in these smaller startups.

Kai-Fu Lee pointed out during his interview with Bloomberg …

“CFIUS regulation is probably the most worrisome for us all Lee said. “The easy thing for us to do is to look for smart, technical Chinese people in America and bring them back to China. That is what Trump’s trade war and open hostility are forcing us to do. That can’t be good for future business development and growth, but if you’re in my shoes, what other choice do you have?”

There have been a series of attempts at negotiation between the U.S. and China to settle the trade war but no progress has occurred since May, with tariffs on $200 billion of Chinese imports due to rise to 25 percent in January from 10 percent and a total of 25% Tariffs on over $500 billion a year on Chinese exports to the United States.

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President Trump has been focused like a laser on China’s widespread theft intellectual property but has said there are as many as 84 barriers to getting a trade dealer. Trump intends to focus on broad themes with Xi at the G-20 and potentially set a framework for the two countries to work together, Commerce Secretary Wilbur Ross said on Thursday. Ross said he doesn’t anticipate the U.S. and China will secure a full deal by January.

Lee said his initial goal for Sinovation Ventures in the U.S. was to help companies there reach Chinese consumers and then the rest of the world. His investments in the U.S. focus on robotics, artificial intelligence, and education technology, with stakes in startups that make autonomous delivery robots, energy data collection tools and AI to improve factory production. Lee went on to point out …

“If our founders were half American and half Chinese, if our money was half American and half Chinese, then both countries gain… It should be doable, but the current trade dispute seems to make it an impossibility. So, we are actually on the path to increasingly separate the two parallel universes.”


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