Foreign penetration of private equity endangers America | TheHill

Until stopped by the FBI in 2018, Alexander Korshunov, a Russia’s state-owned aircraft engine manufacturer, attempted to purloin GE engine technology, using an Italian citizen as a cutout.


Russia too has made espionage investing a preferred tool of statecraft. Dr Eric Hazeltine, the former U.S. intelligence community tech chief, expressed his concerns about Russian technological espionage in his new book, “The Spy at Moscow Station.”


Consider the example of Danhua Capital, a firm based in Silicon Valley that has invested in drones, artificial intelligence and cybersecurity. More than 20 Silicon Valley venture capital firms have close ties to a Chinese government fund or state-owned entity. Chinese VC investment in the United States from January to May 2018 reached almost $2.4 billion, equivalent to the previous full-year high set in 2015. Investment data compiled by Bloomberg show that the value of VC deals with at least one Chinese-domiciled investor reached a record high in 2018.


This was one of the striking conclusions of two recent reports by the Pentagon and the National Counterintelligence Security Center (NCSC). According to the NCSC report, “China uses front companies to obscure the hand of the Chinese government and acquire export controlled technology.”


Much of the public’s attention is focused on the vulnerability of America’s electoral infrastructure to foreign manipulation or cyberattacks by state-sponsored hackers. But Russian and Chinese shell companies fronting for the state are methodically exploiting loopholes in our financial system to steal sensitive technologies and compromise our national security.