TuSimple — now known as CreateAI — was founded in 2015 with funding from 
Sina, known for its microblogging site Weibo, in which the government has a golden share. The chairman and CEO of Sina is Shanghai-born Charles Chao (曹国伟), who also long held US citizenship.
The TuSimple episode “is one of the clearest examples of predatory Chinese investment siphoning US innovation to Beijing — at the expense of our national security and American investors.”
Central to the TuSimple case is the Committee on Foreign Investment in the United States — a Treasury Department-led panel known as Cfius that also includes the Pentagon, Justice Department and other cabinet agencies. The panel can recommend the president block transactions outright or propose that dealmakers agree to guardrails to protect national security.
The slew of failings around TuSimple exposed flaws in this latter approach, demonstrating how a savvy investor like Chao can outrun Cfius and navigate the web of regulations Americans rely on to protect innovation. A judge on Oct 31 found that Chao and his allies continued to influence the company even after a US deal was cut to prevent exactly that.
TuSimple wasn’t just a Chinese company. It had operations in San Diego as well as Beijing. The US foothold was critical: Facing restrictions on testing autonomous vehicles in China at the time, the company used American highways to fine-tune its technology — and a US stock listing to bankroll its future.
US-based talent was also critical. Chao was counting on Xiaodi Hou (侯晓迪), a China-born computer-vision prodigy who had settled in the US, to develop the technology. Road testing began in 2017 in Arizona. By 2019 the company was flush with cash from a fundraising round led by Sina when it won a contract for a pilot project with the US Postal Service.
TuSimple’s early success raised eyebrows in Washington. The Pentagon’s Cfius team flagged concerns about Chao’s China connections as well as the technology’s military potential to their counterparts at the Treasury Department in 2019, according to people familiar with the matter. It would take until Feb 2021 for Treasury officials to determine — over TuSimple’s objections — that Cfius had jurisdiction to intervene, sparking protracted discussions over which measures the government would impose to protect national security.
What the US government didn’t know was that in Mar 2021 — a month after Cfius determined it had jurisdiction over the company — Chao ally and TuSimple co-founder Mo Chen (陈默) filed paperwork to create Hydron, the new startup Sina would back in China to make custom vehicles for TuSimple.
Hydron’s three-member board included a key aide to Chao as well as Chen, who had a long history of working with Sina.
A contingent of Cfius and TuSimple personnel who later examined the arrangement concluded it could enable China to reap the benefits of TuSimple’s advanced technology despite Cfius’ efforts to keep it in the US.
A representative for TuSimple said the company’s staff engaged in talks with Hydron because they were looking for a new manufacturing partner. TuSimple had said in a filing that its board never approved the Hydron partnership.
Finally, in Feb 2022, Cfius and TuSimple settled on a national security agreement meant to “limit access to certain data and adopt a technology control plan”. It had take 3 years from when Pentagon officials first sounded the alarm.
The deal made a host of demands:
* TuSimple’s US and China operations had to stop collaborating
* No one except for a list of vetted personnel in the US could access TuSimple’s critical intellectual property
* Chao as well as Sina’s CFO had to step down from TuSimple’s board
* The company had to appoint two people to serve as liaisons to Cfius, including a “security director” who would join the board
1/n
bloomberg.com/news/features/
Sina, known for its microblogging site Weibo, in which the government has a golden share. The chairman and CEO of Sina is Shanghai-born Charles Chao (曹国伟), who also long held US citizenship.
The TuSimple episode “is one of the clearest examples of predatory Chinese investment siphoning US innovation to Beijing — at the expense of our national security and American investors.”
Central to the TuSimple case is the Committee on Foreign Investment in the United States — a Treasury Department-led panel known as Cfius that also includes the Pentagon, Justice Department and other cabinet agencies. The panel can recommend the president block transactions outright or propose that dealmakers agree to guardrails to protect national security.
The slew of failings around TuSimple exposed flaws in this latter approach, demonstrating how a savvy investor like Chao can outrun Cfius and navigate the web of regulations Americans rely on to protect innovation. A judge on Oct 31 found that Chao and his allies continued to influence the company even after a US deal was cut to prevent exactly that.
TuSimple wasn’t just a Chinese company. It had operations in San Diego as well as Beijing. The US foothold was critical: Facing restrictions on testing autonomous vehicles in China at the time, the company used American highways to fine-tune its technology — and a US stock listing to bankroll its future.
US-based talent was also critical. Chao was counting on Xiaodi Hou (侯晓迪), a China-born computer-vision prodigy who had settled in the US, to develop the technology. Road testing began in 2017 in Arizona. By 2019 the company was flush with cash from a fundraising round led by Sina when it won a contract for a pilot project with the US Postal Service.
TuSimple’s early success raised eyebrows in Washington. The Pentagon’s Cfius team flagged concerns about Chao’s China connections as well as the technology’s military potential to their counterparts at the Treasury Department in 2019, according to people familiar with the matter. It would take until Feb 2021 for Treasury officials to determine — over TuSimple’s objections — that Cfius had jurisdiction to intervene, sparking protracted discussions over which measures the government would impose to protect national security.
What the US government didn’t know was that in Mar 2021 — a month after Cfius determined it had jurisdiction over the company — Chao ally and TuSimple co-founder Mo Chen (陈默) filed paperwork to create Hydron, the new startup Sina would back in China to make custom vehicles for TuSimple.
Hydron’s three-member board included a key aide to Chao as well as Chen, who had a long history of working with Sina.
A contingent of Cfius and TuSimple personnel who later examined the arrangement concluded it could enable China to reap the benefits of TuSimple’s advanced technology despite Cfius’ efforts to keep it in the US.
A representative for TuSimple said the company’s staff engaged in talks with Hydron because they were looking for a new manufacturing partner. TuSimple had said in a filing that its board never approved the Hydron partnership.
Finally, in Feb 2022, Cfius and TuSimple settled on a national security agreement meant to “limit access to certain data and adopt a technology control plan”. It had take 3 years from when Pentagon officials first sounded the alarm.
The deal made a host of demands:
* TuSimple’s US and China operations had to stop collaborating
* No one except for a list of vetted personnel in the US could access TuSimple’s critical intellectual property
* Chao as well as Sina’s CFO had to step down from TuSimple’s board
* The company had to appoint two people to serve as liaisons to Cfius, including a “security director” who would join the board
1/n
bloomberg.com/news/features/
Quote
Byron Wan
@Byron_Wan
Autonomous-trucking company TuSimple, facing several federal investigations — a known risk (see embedded threads), was preparing to exit the US market for China when CEO Cheng Lu directed his staff to ship advanced semiconductors out of the US.
TuSimple used Lansdowne x.com/Byron_Wan/stat…