Chinese venture aims to skirt US sanctions: expert

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A planned venture fund will likely serve as a platform to enhance competition with and acquire technology from the US, an expert said

A plan by a group of Chinese military and business institutions to invest US$471 million to set up a venture capital fund aims to secure high-end military technology by circumventing US sanctions, a defense expert said on Friday.

The plan shows Beijing’s ambitions to cultivate a domestic military supply chain at a time when it has stepped up its threats against Taiwan, said Yang I Kwei (楊一逵), a researcher at the Institute for National Defense and Security Research, a think tank affiliated with the Ministry of National Defense.

Yang’s comments came after Guangzhou Haige Communications Group (廣州海格通信集團), which provides communications and navigation equipment to the Chinese military, on April 7 announced that it would partner with China Poly Group (中國保利集團公司) and other entities to set up a venture capital fund, valued at 3 billion yuan (US$471 million), for the development of military equipment.

Photo: Reuters

Haige Communications, whose predecessor was a military ordnance factory, counts China’s army, navy and air force among its customers, and has participated in the development of the BeiDou Satellite Navigation System.

It is an important supplier of war simulation and pilot training systems to the Chinese military, Yang said.

China Poly is among 102 state-owned enterprises under the supervision of the Chinese Assets Supervision and Administration Commission.

It has served as an importer and exporter of military equipment for China, Yang said.

Participants in the planned venture fund have close ties with Chinese authorities, he said, adding that China Poly is one of its largest controlling institutions.

Poly Technologies (保利科技有限公司), a subsidiary of China Poly, is the largest state-owned supplier of military equipment, missile technologies and drones to the Chinese military, Yang said.

The planned fund is expected to serve as a platform for the Chinese military to enhance its technology competition with the US, which could help Beijing skirt Washington’s sanctions and even secure technology from the US, he said.

The COVID-19 pandemic, US sanctions against Beijing and Russia’s invasion of Ukraine has prompted many venture capitalists to flee Asia, Yang said.

Chinese authorities likely want the planned fund to re-energize the domestic capital venture market, and boost information and communications development in a bid to commercialize technology, he said.

The Chinese military’s efforts in information and communications technology development could enhance Beijing’s supervision and control of personal information and pose a larger threat to democracies, he added.