Following the United States government’s further restrictions on capital investments in Chinese industries posing a national security threat, over twenty private equity firms have committed to not investing in entities located in China and Hong Kong, and will also not accept investments from Chinese investors.
The 33 signatories of the “Clean Capital Certification” vow that their limited partners do not come from or reside in China, Hong Kong, Russia, Iran, North Korea, among other regions, and will not accept investments from these countries and regions. These funds also pledge not to invest in startups from these nations.
This declaration is a private initiative led by the non-profit organization Future Union, which tracks U.S. institutions investing in China, with support from the bipartisan Congressional committee — the House Select Committee on the Communist Party of China.
Future Union is dedicated to addressing foreign interference in the private sector. The organization has provided recommendations on the risks of Chinese investment in U.S. technology sectors to departments including the House Select Committee on the Communist Party and the Department of Commerce. The commitment warns that new technologies falling into the wrong hands could cast a shadow of dictatorship, deception, and division.
The over twenty private equity firms support sensitive technologies such as artificial intelligence and semiconductors.
Chairman of the House Select Committee on the Communist Party and Republican Representative John Moolenaar stated in a release, “When American companies invest in our greatest adversary, or welcome Chinese-supported investors to their boards, the national security and economic prosperity of the United States are at risk.”
“On the contrary, thanks to these patriotic investors, Americans will now have a standard by which to assess their investments,” he said.
Companies that have signed the agreement include Moonshots Capital. Craig Cummings, a partner at the firm, stated in a release, “We must ensure that our adversaries do not directly benefit from our success, publicly signing the ‘Clean Capital Certification’ is a way for the (private equity) community to fulfill this responsibility.”
Moonshots Capital has invested in Elon Musk’s xAI. Early investors in defense technology startups such as Snowpoint Ventures and Scout Ventures have also signed the certification, as well as investors in defense contractor Anduril, Marlinspike Partners, which sells AI-driven weapons and border surveillance systems.
London-based C5 Capital and Australia’s Beaton Zone Ventures have also joined the signatories.
“We believe that in today’s geopolitical landscape, it is crucial (to sign the Clean Capital Certification) as it protects sensitive technologies and upholds principles of freedom and democracy,” said Kurt Scherer, Managing Director of C5 Capital. “By restricting capital from hostile nations, we not only safeguard our investments but also promote a fair and transparent market to counteract authoritarian goals.”
As Silicon Valley venture capital firms increasingly venture into defense technology and law enforcement domains, foreign capital sources are facing stricter scrutiny. Last month, the U.S. Treasury Department finalized rules restricting U.S. investment in high-tech sectors in China, Hong Kong, and Macau, including artificial intelligence, quantum computing, and semiconductor fields. These rules will take effect on January 2.
Andrew King, Executive Director of Future Union, has been working on certifying this commitment for about three years and expressed concern that the infiltration of Chinese entities in the U.S. private equity sector may take even longer. He recalled discussing with a friend from the Department of Defense the dangers of Chinese infiltration actions in the United States and how China influences venture capital and private equity through money and other incentives to acquire critical technology.
King mentioned that if a company has Chinese investors, these investors — and then the Chinese government — may gain access to proprietary information of the investment portfolio companies.
He added that the document is voluntary and does not have legal effect. However, King also emphasized that private equity funds adopting Clean Capital promote transparency and will enjoy higher credibility and trust.
(This article referenced reports from Nikkei News and The Washington Post)