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U.S. Scrutiny Drives Away Chinese Tech Investors

Chinese companies are pulling back from investing in U.S. tech companies as authorities in Washington step up their scrutiny of foreign investment due to security concerns. The pressure is sending Chinese firms hunting for deals in Europe, Israel and Southeast Asia, where Beijing is encouraging stronger economic ties.

The investment slowdown is being driven by the Committee on Foreign Investment in the United States, the interagency panel charged with making sure foreign acquisitions don’t hurt U.S. national security. CFIUS has been broadening the scope of its reviews of corporate deals to include data that could be used in harmful ways if it fell into the wrong hands. U.S. authorities’ concern over data potentially finding its way to the Chinese government, including information gleaned from mobile advertising, has killed some deals and caused some investors to rethink their strategy in the U.S.

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Southeast Asia also has seen rising Chinese investment, but for different aims. There, Chinese buyers are getting access to a fast-growing and potentially large market, but not much in the way of breakthrough technology. By August, tech deals in the region had hit $5 billion, already nearly $2 billion more than all of 2016, according to CB Insights. Among the marquee investments are Alibaba’s $2 billion acquisition of e-commerce site Lazada and a $1.1 billion Alibaba-led investment in Indonesian startup Tokopedia. Social media giant Tencent and online retailer JD.com participated in a nearly $1 billion investment round for Indonesian unicorn Go-Jek, while Grab, Southeast Asia’s biggest ride-sharing company, raised $2.5 billion from investors including China’s Didi Chuxing.

Rahul Harkawat commented on this article.
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