G42, an AI Giant, Ends Partnership with China and Expands Operations in the US
Tech firm G42, known for its focus on artificial intelligence (AI) and cloud computing, has made a significant decision to shift its attention from China to Western markets, particularly the United States. This move comes as concerns have been raised by U.S. lawmakers about the company’s association with China’s communist regime. The CEO of G42, Xiao Peng, revealed in an interview with Bloomberg that all of their previous investments in China have been divested, leading to the company no longer requiring a physical presence in the country.
The House Select Committee on the Chinese Communist Party (CCP) has expressed concerns over G42’s ties with Chinese business. They have even requested the Commerce Department to consider imposing sanctions on G42 and its subsidiaries due to their extensive collaboration with the Chinese regime’s military, intelligence services, and state-owned entities. It has been reported that G42’s $10 billion tech fund, 42X, had invested in Chinese companies like ByteDance, the owner of popular short video platform TikTok. G42’s stake in ByteDance was estimated to be around $100 million.
Rep. Mike Gallagher, chairman of the House China committee, commended G42’s decision to reduce its investment exposure to Chinese entities. He believes that any investment in China, especially in blacklisted entities, only supports the Chinese Communist Party’s human rights abuses, military build-up, and techno-totalitarian surveillance state. Rep. Gallagher encourages more companies to follow G42’s lead as a welcome first step in reducing their exposure to the CCP.
G42, headquartered in Abu Dhabi, has established strong commercial relationships with major U.S. tech giants like Microsoft, Dell, and OpenAI. However, the company has also developed ties with Chinese companies, even those sanctioned by the U.S. government. This has raised concerns among American officials. The House China committee’s review of documents revealed that CEO Xiao Peng is affiliated with an expansive network of Emirati and Chinese companies involved in the development of dual-use technologies that support the Chinese military’s advancement and human rights abuses.
One of G42’s significant partnerships is with Huawei, a Chinese telecommunications giant with deep connections to the People’s Liberation Army. Since 2019, Huawei has faced severe trade restrictions imposed by the U.S. government. Rep. Gallagher points out that if Huawei can access advanced AI hardware and cloud computing services through partners like G42, it will further undermine the export controls against Huawei.
Another concern raised by Rep. Gallagher is G42’s connection with BGI, China’s biggest genomics company. BGI, formerly known as Beijing Genomics Institute, was added to the Pentagon’s blacklist of entities linked to the CCP’s military wing in 2021. A prenatal test developed by BGI in collaboration with the Chinese military reportedly harvested genetic data from women in over 50 countries, including the United States. The Commerce Department imposed export restrictions on two units of BGI in March 2023, citing the significant risk of contributing to CCP surveillance.
U.S. intelligence officials have expressed fears that G42 could potentially serve as a conduit for transferring advanced American technology to Chinese companies or the government. However, G42 has denied these allegations and stated that their engagements with Chinese companies are standard practice among global technology companies.
Despite their denial, G42 has decided to sever ties with Chinese companies and focus on partnerships with U.S. entities instead. CEO Xiao Peng confirmed that they were phasing out Chinese hardware provided by Huawei, including processors and data centers. As a commercial company, G42 believes they have reached a point where they must make a choice and cannot work with both sides simultaneously.
G42’s decision to reduce its exposure to China and expand its operations in the U.S. marks a significant shift in the company’s strategy. With concerns about Chinese influence and potential technology transfers, G42’s move aligns with the growing sentiment among U.S. lawmakers to protect American interests and reduce reliance on China. As more companies consider following G42’s lead, the landscape of technology partnerships and investments may see a notable transformation in the coming years.
