Will Donald Trump’s flattery of Xi Jinping offset US red flags around Chinese investment?

When Citic Group invested US$20 million last year in NextVR, developer of a virtual reality technology used to broadcast live events, the investment firm linked to China’s central government may have pulled closer to the US in terms of military might.

So goes the thinking behind an effort in Washington to halt such transactions, a move with as many implications for tech investors in Cambridge, Massachusetts and Silicon Valley as it has for the US Department of Defence (DoD) and Department of Homeland Security (DHS).

At stake is more than US$62 billion worth of Chinese investment in early-stage US tech companies, in addition to large-scale investments of a billion US dollars or more.

For US President Donald Trump, who will be in Beijing next month to push for easier access to the Chinese market for American companies, rising concern about what technologies China is sourcing in the US couldn’t come at a worse time.

Trump tweeted about the “extraordinary elevation” of President Xi Jinping at the recently concluded Communist Party congress in Beijing, praising a leader who has made no secret of his plans to marshal state and private resources to foster home-grown tech innovation leaders.

At the same time, US Commerce Secretary Wilbur Ross lauded a “more cooperative” relationship with Beijing in efforts to cut off trade with North Korea and signalled his intention to work for a relaxation of regulations that force US companies operating in China to form joint ventures with local companies and share intellectual property.