In July 2023, China and Russia conducted joint air and sea drills in the Sea of Japan in an alarming display of military cooperation. Five Chinese warships and four ship-borne helicopters joined with Russian forces to conduct joint exercises. The drill marks the latest of several recent military exercises between China and Russia, signaling deepening military cooperation that goes beyond just proclamations and extends into practice.

The growing China-Russia partnership across military, economic, and political domains over the past decade has been increasingly documented in recent years, as has the acknowledgment of the rising threat that the two countries jointly pose to the world. The collective risk and threat of China and Russia to the stability of the free, liberal, international order is heightened by their deepening partnership: the two countries are stronger together than apart and are a greater threat as collaborators than individual actors.

In June 2021, Russian President Putin and Chinese President Xi Jinping extended the Sino-Russia Treaty of Friendship, a 20-year-old friendship and cooperation treaty between Russia and China, for another five years. In February 2022, Putin and Xi released a joint statement in February 2022 announcing a “no limits” strategic partnership between the two countries. Russia’s invasion of Ukraine was a significant tipping point that strengthened China’s alliance with Russia: the 2023 Annual Threat Assessment from the Office of the Director of National Intelligence (ODNI) warns that “despite global backlash over Russia’s invasion of Ukraine, China will maintain its diplomatic, defense, economic, and technology cooperation with Russia to continue trying to challenge the United States.”

High-profile public statements and government strategies obscure China and Russia’s more meaningful partnership on critical technology. The more covert relationship between the two countries is their growing cooperation in dual-use technology ecosystems. Globally, technological superiority increasingly determines military prowess, shapes supply chains, and protects national security. As such, China and Russia’s joint R&D advancements, corporate partnerships, and venture capital co-investments across emerging technology pose a massive risk. As the National Security Commission on AI (NSCAI) foreshadowed two years ago, “The U.S. military has enjoyed military-technical superiority over all potential adversaries since the end of the Cold War. Now, its technical prowess is being challenged, especially by China and Russia. Senior military leaders have warned that if current trend lines are not altered, the U.S. military will lose its military-technical superiority in the coming years.”

The most critical capabilities that ensure military-technical superiority for the United States, our allies, and our adversaries alike originate from startups backed by venture capital investments. It is imperative to analyze China and Russia’s involvement in and support of each other’s technology ecosystems. The somewhat nebulous venture capital investments in China and Russia’s startup ecosystems must be understood and mitigated against for the sake of U.S. national security and technological dominance.    
    
China and Russia’s Technological Cooperation

Most analysis of Chinese-Russian technological collaboration pertains to matters of military, corporate, and research cooperation. What is missing is an understanding of the deep embeddedness that China and Russia are trending toward in critical technology areas through venture capital investments. Scrutiny of the two countries’ collaboration is typically focused on high-level corporate and government statements and strategies. For several years, the U.S. tracked ongoing conversations between China and Russia regarding a “potential technology transfer deal in which Moscow would provide Beijing with the RD-180 rocket engine in exchange for space-grade microelectronic components.” Other coverage has outlined the increasing number of joint science and technology (S&T) parks modeled after Silicon Valley, such as the China-Russia Innovation Park or the Sino-Russian Silk Road Hi-tech Innovation Park. Publicized partnership announcements between state-owned corporations also indicate growing collaboration. The Russian state-owned nanotechnology firm Rusnano completed a strategic cooperation agreement in 2015 with China Aerospace Science and Industry Corporation (CASIC), a Chinese state-owned military company.

Huawei serves as another example of increasing allegiance between China and Russia from a corporate perspective. The Chinese telecommunications company rapidly expanded into Russia to mitigate the impact of sanctions from the E.U. and signed a deal with Russia’s largest mobile operator, MTS, to develop 5G technology in Russia. In 2019, Huawei announced that it would triple its R&D staff in Russia, increase the number of R&D facilities in Russia, and train 50,000 Russian technical experts.

These public announcements by state-owned or state-connected companies, as well as broadcasted government-level interests, shed some light on the ongoing technological collaboration between China and Russia. Yet focusing just on corporate partnerships, R&D collaboration, and government cooperation vastly underestimates and downplays their true strategic alliance. China and Russia are also investing together at the beginning of the tech stack through venture capital. Both countries are harnessing the startup ecosystem to obtain critical and emerging technology via state-owned venture capital funds and sovereign wealth funds. In many cases, they are doing so together. Examining the flow of shared venture capital investments between China and Russia indicates not only each government’s priority areas, but also how intertwined their interests are.  

At the most basic level, the startup and VC ecosystem is largely comprised of investors looking to invest and startups looking to raise rounds. Understanding where prolific VC firms are placing bets provides insight into promising markets and technologies and high-potential startups and founders. However, analyzing state-owned venture capital firms and sovereign wealth funds provides immense insight into a nation’s technology interests and goals. These firms operate either with some sort of deference to or entirely on behalf of a government entity. As such, examining Russia and China’s leading sovereign wealth funds and state-owned venture capital firms reveals both their individual technology interests and points of collaboration between the two countries.

China and Russia’s Venture Capital Ecosystem

Russia’s venture capital and startup ecosystem is vastly dwarfed by China’s, but both countries have active state-owned investors and sovereign wealth funds. Pitchbook, CB Insights, and Crunchbase capture data on these funds and their investments. In Russia, The Russian Direct Investment Fund is one of the country’s major sovereign wealth funds, with $10B in assets under management (AUM) and 128 investments to date since 2011. The Russian Venture Company is a government fund with $750M AUM, founded in 2006. The Russian state-owned company Rusnano manages several venture capital and private equity funds, and invests across nanotechnology, oil and gas, and information technology.

China’s pockets are even deeper and its investments more prolific: China Investment Corporation is a sovereign wealth fund with $1T in AUM and over 100 investments; Shenzhen Capital Group and Oriza Holdings were established by the Chinese government and manage $64B and $12B respectively, and have made over 200 investments each.

Several of these investing entities are connected with one another and/or other Russian and Chinese VCs. The Russia-China Investment Fund was established in 2012 and is managed by the China Investment Corporation and the Russia Direct Investment Fund, both of which committed $1B to the fund. They were later joined by Saudi Arabia’s Public Investment Fund, which committed $500M to the fund in 2018. The fund has made 45 public investments to date, per Pitchbook. The Russian state-owned firm Rusnano and the Chinese investment bank Zhongrong International Trust jointly manage the Rusnano Zhongrong United Investment Fund (based in Beijing), focused on oil and gas, microelectronics, and biotechnology. China Development Bank and Russian Direct Investment Fund manage the China-Russia RMB Investment Cooperation Fund, based in Moscow and targeting the energy sector.

Certain deals from these venture capital funds indicate technology areas of interest to the two countries and ongoing quid-pro-quo collaboration. Generally, from these shared funds, investments in Russian-based startups tend to focus on energy, healthcare/pharmaceuticals, and metals/mining; investments in Chinese-based startups trend toward AI, semiconductors, and autonomy. Some of the Russia-China Investment Fund’s recent large investments provide a good overview of this trend.

Russia-China Investment Fund (selected recent investments, per Pitchbook, CB Insights, and Crunchbase)
 

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These investments by the Russia-China Investment Fund provide insight into Russia and China’s mutual interests in autonomy, advanced chips, and biotech, among other areas. The two countries have teamed their sovereign wealth funds to spur on technology investments in critical sectors that will further their defense and commercial operations. The fund illustrates how the Chinese and Russian governments are using venture capital and other investments to facilitate technology developments and jointly benefit, technologically and financially, from their success. Some of these investments will have downstream effects for the commercial sector and/or supply chain security; some of these investments threaten to lend China or Russia superior technological capabilities for military use cases; and for some investments both are true.

Russia-China Investment Fund Case Studies

One of the Russia-China Investment Fund’s most high-profile investments was in Biren Technology, a Chinese AI chip startup. The company has raised over $600M dollars to date to build out GPUs suitable for AI, high-performance computing, and graphics rendering, intended to rival NVIDIA, with applications across commercial and defense. What is concerning is not just China’s progress in developing an AI-enabled chip, but also Russia’s backing of this effort, and the various questions it raises around how both countries will benefit, commercially and militarily, from such an undertaking.

The Russia-China Investment Fund participated in the Series B funding of Biren Technology in March 2021. Two years later, Biren Technology was blacklisted by the United States in October 2023, and added to the Entity List in an effort to restrain “Chinese military modernization efforts by controlling advanced AI chips made with U.S. inputs.” The United States House Select Committee on the Chinese Communist Party is currently investigating U.S.-headquartered VC fund Walden International for its investment in Biren Technology, among other Chinese companies.  

MiningLamp is another concerning startup with strong backing from the Russia-China Investment Fund, several Chinese investment banks, and two Chinese VCs with ties to the United States (Sequoia Capital China [now called HongShan] and GSR Ventures China). MiningLamp has raised just short of $1B in venture capital and is hailed as “China’s Palantir” given its big data and enterprise AI platform. The company likely has a similar dual-use focus as Palantir, with a breadth of commercial and government use cases; per Crunchbase, CCTV is a customer of MiningLamp.

Conclusion

These venture capital investments offer a much more complete picture of China and Russia’s technological collaboration. The United States government must develop a mechanism to proactively monitor China and Russia’s individual and joint venture capital activity. It is critical information that indicates advancements in emerging technology, which underpins military dominance. A simple tracker could easily outline every investment over the past five years from the two countries’ jointly managed funds. That tracker should also include investments from China and Russia’s individual state-owned venture capital funds and sovereign wealth funds – and should particularly focus on China, which has a much more robust venture capital ecosystem than Russia. These investments would reveal areas of interest to both countries’ governments, and indicate where they are looking to build up capabilities in the startup ecosystem.  

Granted, Pitchbook, CB Insights, and Crunchbase are constrained by data that is publicly available or shared by investors, but it at least serve as a starting point. From a different angle, the United States should also monitor the leading China-headquartered startups in all fourteen critical technology areas prioritized by the DoD. The United States must understand, monitor, and track advancements that China is making through the startup ecosystem in space, advanced computing, human-machine interfaces, and other critical areas.  The United States is in a race for technological superiority with China. Tracking venture capital investments in China’s domestic startup ecosystem provides insight into who might win that race.  

Adjacent government efforts have been stood up in recent years to examine venture capital and national security, but they are focused on only a sliver of the entire challenge. Functions such as the Committee on Foreign Investment in the United States (CFIUS) exist to examine inbound foreign investments in the U.S. for national security risks. Additionally, President Biden recently issued Executive Order 14105 to regulate outbound investment to China in the areas of semiconductors and microelectronics, quantum information technologies, and AI.  But outside of these investment screens, there exists today little to no US government process to monitor and track all adversarial foreign VC investments, joint or collaborative, domestic or worldwide.  

The rising threat from China and Russia, individually and collectively, necessitates a deep and continuous analysis of their growing partnership, particularly across the technology domain. It would be remiss to focus solely on government-level political statements when the flow of million-dollar deals between the two countries under the guise of venture capital provides additional insight into their technological collaboration and activity. The investments that China and Russia are jointly pursuing and benefitting from – ranging from AI chips to autonomous systems – threaten the security of the United States and our allies abroad. It is imperative to understand, monitor, track, and mitigate against the rising threat of the two countries’ technological partnership, particularly from a venture capital standpoint.  

The views expressed in this article are those of the author and do not represent those of any previous or current employers, the editorial body of SIPR, the Freeman Spogili Institute, or Stanford University.