Since 2018, the United States has tightened its regulations to prevent rival nations from acquiring stakes in sensitive sectors, effectively blocking investments in areas ranging from semiconductors to telecommunications.
However, these restrictions were not always in place.
In 2016, Jeff Stein, a seasoned journalist covering the U.S. intelligence community, received a confidential tip: a small insurance company specializing in liability coverage for FBI and CIA agents had been acquired by a Chinese entity.
“Someone with direct knowledge contacted me, saying, ‘Are you aware that the insurance provider for intelligence personnel is now owned by the Chinese?'” he recalls. “I was astonished!”
In 2015, Wright USA, the insurer in question, had been quietly purchased by Fosun Group, a private company with reported close ties to the Chinese leadership.
The U.S. concerns were immediately apparent: Wright USA possessed the personal information of numerous top-secret service agents and intelligence officials. With the insurer and its parent company, Ironshore, under Chinese ownership, the accessibility of this data became a pressing question.
Wright USA was not an isolated incident.
The BBC has obtained exclusive early access to new data revealing the flow of Chinese state funds into wealthy nations, encompassing asset acquisitions in the U.S., Europe, the Middle East, and Australia.
Over the past two decades, China has emerged as the world’s largest overseas investor, potentially enabling it to dominate sensitive industries, acquire secrets, and control key technologies. Beijing classifies the details of its foreign spending – the amount and destination of funds – as state secrets.
Regarding the Wright USA sale, Stein notes: “There was nothing illegal about it; it was, so to speak, transparent. However, given the close interconnections in Beijing, this effectively ceded that [information] to Chinese intelligence.”
The Chinese government was involved in the transaction: newly accessed BBC data indicates that four Chinese state banks provided a $1.2 billion (£912 million) loan, channeled through the Cayman Islands, to facilitate Fosun’s acquisition of Wright USA.
Stein’s report was published in Newsweek magazine, prompting a swift response in Washington. The Committee on Foreign Investment in the United States (CFIUS), a division of the U.S. Treasury responsible for screening investments, initiated an inquiry. Shortly thereafter, the company was sold again, reverting to American ownership. The instigator of this sale remains unclear.
Fosun and Starr Wright USA, the current owner of Wright USA, have not responded to the BBC’s request for comment.
High-level U.S. intelligence sources confirm that the Wright USA sale was a contributing factor in the first Trump administration’s decision to strengthen its investment regulations in 2018.
At the time, few could have discerned that this Chinese state-backed spending appeared to be part of a broader strategy by Beijing to invest in and acquire assets across all continents.
“For many years, we assumed that virtually all of China’s money flows were going to developing countries,” says Brad Parks, executive director of AidData. “And so, it came as a great surprise to us when we realised that actually there were hundreds of billions of dollars going into places like the US, the UK and Germany, happening right underneath our noses.”
AidData, a research lab based in Virginia specializing in tracking government spending outside their borders, is based at William & Mary, one of America’s oldest universities, and receives funding from governments and charitable organizations worldwide. For the past 12 years, AidData has maintained a significant focus on China.
A four-year undertaking involving 120 researchers has resulted in the first known comprehensive tally of China’s state-backed investments worldwide. The group’s entire dataset is available open source, although the BBC was granted exclusive advance access.
AidData’s primary finding: since 2000, Beijing has invested $2.1 trillion outside its borders, with a roughly equal distribution between developing and wealthy nations.
“China has a kind of financial system that the world has never seen,” says Victor Shih, director of the 21st Century China Centre at University of California San Diego. China has the largest banking system in the world – larger than the US, Europe and Japan put together, he adds.
This scale, combined with Beijing’s control over state banks, offers unique advantages.
“The government controls interest rates and directs where the credit goes,” Mr Shih says. “This is only possible with very strict capital control, which no other country could have on a sustainable basis.”
Some investments in wealthy economies appear to be driven by the pursuit of financial returns. Others align with Beijing’s strategic goals, as outlined a decade ago in the Made in China 2025 initiative.
This initiative detailed a clear plan for China to dominate 10 cutting-edge industries, including robotics, electric vehicles, and semiconductors, by the year 2025.
Beijing sought to fund significant foreign investments to repatriate key technologies to China.
Global alarm at the plan led China to drop public mention of it, but Victor Shih says it “stayed very much alive” as a guiding strategy.
“There are all kinds of plans still being published,” he says, “including an artificial intelligence plan and a smart manufacturing plan. However, the mother of all plans is the 15th five-year plan.”
At a key meeting of the Communist Party last month, China’s leaders set the goal of accelerating “high-level scientific and technological self-reliance and self-improvement” until 2030.
AidData’s new database highlights state-backed spending overseas that matches the 10 sectors targeted in 2015. The BBC’s earlier reporting detailed how the Chinese government bankrolled the purchase of a UK semiconductor company.
The United States, the UK, and numerous other major economies have strengthened their investment screening mechanisms following instances where they appeared to be caught off guard by transactions such as the sale of Wright USA.
AidData’s Brad Parks explains that wealthy governments initially failed to recognize that Chinese investments in each country were part of Beijing’s broader scheme.
“At first blush, they thought it was just a lot of individual initiative from Chinese companies,” he says. “I think what they’ve learned over time is that actually Beijing’s party state is behind the scenes writing the cheques to make this happen.”
However, it is important to emphasize that these investments and acquisitions are legal, despite sometimes being obscured through shell companies or routed through offshore accounts.
“The Chinese government has always required Chinese enterprises operating overseas to strictly comply with local laws and regulations, and has consistently supported them in conducting international co-operation based on mutual benefit,” the Chinese embassy in London told the BBC.
“Chinese companies not only provide quality products and services to people around the world, but also contribute actively to local economic growth, social development and job creation.”
China’s spending patterns are evolving, according to the AidData database, with Beijing’s state funds increasingly directed towards countries that have chosen to embrace Chinese investment.
In the Netherlands, there has been discussion surrounding Nexperia, a troubled Chinese-owned semiconductor company.
It also appears in the AidData database – Chinese state banks provided $800 million in loans to assist a Chinese consortium in acquiring Nexperia in 2017. Two years later, ownership transferred to another Chinese company, Wingtech.
Nexperia’s strategic importance was underscored when Dutch authorities assumed control of the company’s operations in September, citing concerns that Nexperia’s technology was at risk of being transferred to other parts of the larger Wingtech company.
This decisive action effectively divided Nexperia in two, separating its Dutch operations from its Chinese manufacturing.
Nexperia confirmed to the BBC that its Chinese business had ceased operating within Nexperia’s governance framework and was disregarding instructions.
The company stated that it welcomed China’s commitment to resuming exports of its critical chips to global markets.
Xiaoxue Martin, a research fellow at the Clingendael Institute in The Hague, notes that many in the Netherlands were surprised by the government’s handling of the case, as they have historically managed their relationship with China with care.
“We’re a country that has always done very well with open trade, free trade. And this is really the merchant side of Dutch policy,” she says. “Only recently we found that actually, hold on – geopolitics makes it necessary to have more industrial policy, to have this investment screening, when in the past there wasn’t that much attention for this.”
Xiaoxue Martin cautions against overreacting and fearing potential ramifications of extensive business dealings with a superpower like China.
“There’s a danger of making it seem as if China is this monolith, that they all want the same thing, and that they’re all out to get Europe, and to get the United States, when obviously that’s not the case,” she says.
“Most companies, especially if they’re private, they just want to make money. They want to be treated as a normal company. They don’t want to have this negative reception that they’re getting in Europe.”
If China has such a head start over its competitors in its strategy to acquire stakes in sensitive sectors, does this mean the race to dominate these fields is already decided?
“No! There’s gonna be multiple laps,” maintains Brad Parks. “There are many Chinese companies that are still trying to make these types of acquisitions. The difference is, now they’re facing higher levels of scrutiny to vet these inbound sources of foreign capital.
“So China makes its move. China is not the follower any more, it is the leader. It is the pace setter. But what I’m anticipating is that many G7 countries are going to move from the back foot to the front foot.
“They’re going to move from defence to offence.”
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