US Concerned About Chinese Investments in Artificial Intelligence

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The United States appears poised to heighten scrutiny of Chinese investment in Silicon Valley to better shield sensitive technologies seen as vital to U.S. national security, current and former U.S. officials have told japantimes.com. Of particular concern is China’s interest in fields such as artificial intelligence (AI) and machine learning, which have increasingly attracted Chinese capital in recent years.

The worry is that cutting-edge technologies developed in the United States could be used by China to bolster its military capabilities. The U.S. government is now looking to strengthen the role of the Committee on Foreign Investment in the United States (CFIUS), the inter-agency committee that reviews foreign acquisitions of U.S. companies on national security grounds. An unreleased Pentagon report warns that China is skirting U.S. oversight and gaining access to sensitive technology through transactions that currently don’t trigger CFIUS reviews.

“We’re examining CFIUS to look at the long-term health and security of the U.S. economy, given China’s predatory practices in technology”, said a Trump administration official, who was not authorized to speak publicly.

Defense Secretary Jim Mattis weighed into the debate recently, calling CFIUS “outdated” and telling a Senate hearing: “It needs to be updated to deal with today’s situation.”

“Artificial intelligence is one of many leading-edge technologies that China seeks and that has potential military applications,” said the official. “These technologies are so new that our export control system has not yet figured out how to cover them, which is part of the reason they’re slipping through the gaps in the existing safeguards”. The legislation would require CFIUS to heighten scrutiny of buyers hailing from nations identified as potential threats to national security. CFIUS would maintain the list, the aide said, without specifying who would create it.

James Lewis, an expert on military technology at the Center for Security and International Studies, said the U.S. government is trying to catch-up. “The Chinese have found a way around our protections on technology transfer in foreign investment. And they’re using it to pull ahead of us, both economically and militarily,” Lewis said. However, some industry experts warn that stronger U.S. regulations may not succeed in halting technology transfer and might trigger retaliation by China, with economic repercussions for the United States.

China made the United States the top destination for its foreign direct investment in 2016, with $45.6 billion in completed acquisitions and greenfield investments, according to the Rhodium Group, a research firm. Investment from January to May 2017 totaled $22 billion, which represented a 100 percent increase against the same period last year, it said. Concerns about Chinese inroads into advanced technology come as the U.S. military looks to incorporate elements of artificial intelligence and machine learning into its drone program.

Project Maven, as the effort is known, aims to provide some relief to military analysts who are part of the war against Islamic State.

These analysts currently spend long hours staring at big screens reviewing video feeds from drones as part of the hunt for insurgents in places like Iraq and Afghanistan. The Pentagon is trying to develop algorithms that would sort through the material and alert analysts to important finds, according to Air Force Lieutenant General John N.T. “Jack” Shanahan, director for defense intelligence for warfighting support.

Similar image recognition technology is being developed commercially by firms in Silicon Valley, which could be adapted by adversaries for military reasons. Shanahan said he’s not surprised that Chinese firms are making investments there. “They know what they’re targeting,” he said. Research firm CB Insights says it has tracked 29 investors from mainland China investing in U.S. artificial intelligence companies since the start of 2012.

“When the Chinese make an investment in an early stage company developing advanced technology, there is an opportunity cost to the U.S. since that company is potentially off-limits for purposes of working with (the Department of Defense),” the report said.

China has made no secret of its ambition to become a major player in artificial intelligence, including through foreign acquisitions. Chinese search engine giant Baidu Inc launched an AI lab in March with China’s state planner, the National Development and Reform Commission. In just one recent example, Baidu Inc agreed in April to acquire U.S. computer vision firm, xPerception, which makes vision perception software and hardware with applications in robotics and virtual reality.