Out-of-Bounds Investments: How Some American Investors Are Helping the Chinese Military
Hello and happy Thursday! On this date in 1958, the United States and Canada agreed on the creation of the North American Air Defense Command, eventually becoming the North American Aerospace Defense Command (NORAD). Interesting fact: NORAD’s alternate command center is built into Cheyenne Mountain in Colorado, and includes 15 buildings inside the mountain—one mile from the facility entrance and 2,000 feet below the mountain’s peak.
Interestingly, it was in a similar facility where Steve Hayes provided my first indoctrination “lesson” after joining The Dispatch. Between sessions of being waterboarded with Spanish wine while he yelled, “WE DON’T DRINK MERLOT,” Steve also explained that a big part of what we want to do at The Dispatch is to introduce and explain topics that are important, but perhaps not familiar. This newsletter discusses one such topic—the national security risks of some American foreign direct investment (FDI), also called “outbound investment.”
When we talk about outbound investment, we’re discussing U.S. direct investment outside of our own country. According to the Bureau of Economic Analysis at the Department of Commerce, American FDI amounted to $6.15 trillion in 2020, up $244.9 billion over the previous year (the 2021 numbers don’t come out until July). Nearly $124 billion of this funding went to China, with $2.5 billion in U.S. venture capital going to the Chinese technology industry. And this is where the national security concerns come in.
We’ve previously talked at length about how technology plays a role in U.S. and Chinese ambitions and how it is at the heart of Washington’s and Beijing’s current economic, social, and political confrontation. But let me make the problem more tangible with a specific example.