Tech Firm G42 Shifts Focus from China to Western Markets Amid U.S. Lawmakers’ Concerns

Tech firm G42 is shifting its focus from China to American and other Western markets following concerns raised by U.S. lawmakers about its association with China’s communist regime.

In an interview with Bloomberg published on Monday, the chief executive of G42, Xiao Peng, said: “All of our China investments that were previously made are already divested. … Because of that, of course, we have no need anymore for any physical China presence.”

The company’s move comes amid increasing scrutiny over its ties to Chinese business. The House Select Committee on the Chinese Communist Party (CCP) has asked the Commerce Department to consider imposing sanctions on G42 and its subsidiaries, saying that the group “works extensively” with the Chinese regime’s military, intelligence services, and state-owned entities.

The company’s $10 billion tech fund, 42X, reportedly invested in Chinese companies, including ByteDance, owner of the short video platform TikTok. Its stake in ByteDance was estimated at $100 million, Financial Times reported, citing research firm PitchBook.

Rep. Mike Gallagher (R-Wis.), chairman of the House China committee, applauded G42’s decision to reduce its investment exposure to Chinese entities.

“There is no such thing as a private company in China and any investment in China, particularly in blacklisted entities, only funds and facilitates the Chinese Communist Party’s human rights abuses, military build-up, and techno-totalitarian surveillance state,” Mr. Gallagher said in a Feb. 10 statement.

The congressman encouraged more companies to follow G42’s lead, which he called a “welcome first step” in reducing their exposure to the CCP.

American Concerns

G42 is an Abu Dhabi-based company focusing on artificial intelligence (AI), cloud computing, and other cutting-edge technologies. It’s chaired by Sheikh Tahnoon bin Zayed, the national security adviser of the United Arab Emirates and an influential member of the Al Nahyan royal family.

The company has built commercial relationships with U.S. tech giants like Microsoft, Dell, and OpenAI. But G42 also developed ties with Chinese companies, including those sanctioned by the U.S. government, raising concerns among American officials.

A review of the document by the House China committee has found that Mr. Xiao “operates and is affiliated with an expansive network” of Emirati and Chinese companies that “develop dual-use technologies and materially support” the Chinese military’s advancement as well as human rights abuses, according to the letter dated Jan. 3.

G42’s ties to China include its partnerships with Huawei, a Chinese telecom giant with deep ties to the People’s Liberation Army. Since 2019, Huawei has been heavily targeted by U.S. government trade restrictions. Still, Mr. Gallagher pointed out that the “export controls against Huawei will be further undermined if Huawei can access and/or acquire advanced AI hardware and cloud computing services through its partners like G42.”

Mr. Gallagher also raised concerns over G42’s connection with China’s biggest genomics company, BGI, formerly known as Beijing Genomics Institute, which was added to the Pentagon’s blacklist of entities deemed to be connected to the CCP’s military wing in 2021.

A prenatal test developed by BGI in collaboration with the Chinese military was reportedly used to harvest genetic data of women in over 50 countries, including the United States. In March 2023, the Commerce Department imposed export restrictions on two units of BGI, saying their collection and analysis of genetic data “poses a significant risk” to contribute to the CCP’s surveillance.

“Without new restrictions against G42, the company’s extensive AI capabilities will provide much-needed analytical capacity for BGI to exploit the data it has collected from American citizens, to include millions of pregnant women,” Mr. Gallagher said in the letter.

The New York Times reported last November that U.S. intelligence officials feared G42 “could be a conduit by which advanced American technology is siphoned to Chinese companies or the government.”

G42 said it “categorically” denied allegations made in the lawmakers’ letter and in The New York Times report, according to a Jan. 11 statement released on its website.

“G42 has established a worldwide network of partnerships over time, including some Chinese companies. Such engagements are standard practice among global technology companies,” it said.

Nevertheless, the Gulf tech company decided to sever ties with Chinese companies in favor of U.S. partners. Mr. Xiao told Financial Times last December that the company was phasing out Chinese hardware provided by Huawei, which included processors and data centers.

“For better or worse, as a commercial company, we are in a position where we have to make a choice,” Mr. Xiao told the publication at the time. “We cannot work with both sides. We can’t.”