Silicon Valley investment firm, Sequoia Capital, has come under scrutiny from Congress regarding its investments in China. In response to concerns about U.S. investment dollars advancing Chinese interests, Sequoia has been requested by the Select Committee on the Chinese Communist Party to provide more detailed information on how it plans to prevent further funding of Chinese tech sectors.
Key Takeaway
Sequoia Capital is facing congressional scrutiny over its investments in China and has been requested to provide more detailed information on its split and measures taken to prevent U.S. dollars from supporting Chinese interests in strategic tech sectors.
Sequoia Announces Split to Ensure Compliance
In June, Sequoia Capital announced its decision to split into three separate entities: Sequoia Capital in the U.S. and Europe, Peak XV Partners in India and Southeast Asia, and HongShan in China (formerly known as Sequoia Capital China). While the company stated that the split was due to the increasing complexity of running a global investment business, it was widely understood that the move was made in anticipation of potential legal requirements to divest from certain lines of business in China.
Government Calls for Further Assurance
The Select Committee on the Chinese Communist Party, led by Congressman Mike Gallagher, has voiced the need for further assurance from Sequoia. The committee wants to ensure that the split is being carried out effectively and if it will effectively prevent U.S. dollars from supporting Chinese technology sectors such as quantum computing, semiconductors, and AI.
Remaining Concerns and Questions
The committee acknowledges that Sequoia’s split seems to address some concerns, but raises several key questions. Firstly, there is concern that the split could paradoxically intensify investments in the industries restricted by allowing HongShan in China to operate without the screening and oversight of its U.S. counterpart. Secondly, the committee is also concerned about the potential for intensified investments in U.S. startups by HongShan for similar reasons.
Request for Detailed Information
In the letter addressed to Sequoia, the committee requests a list of all companies that Sequoia has invested in with operations in China, along with specific details such as ownership, Chinese government interest, and decision-making processes. Furthermore, information on the reported 50 percent of Sequoia Capital China limited partners based in the U.S. and their investments is also sought.
The letter concludes by posing a hypothetical scenario and asks how Sequoia would respond if one of its portfolio companies were to be put on a sanctions or trade restriction list by the U.S. government.
The committee expects a response from Sequoia by November 1st, considering that some of the requested information may be confidential or subject to change.
