SpaceX and Chinese Investment: Secret Backdoor Allegations

SpaceX and Chinese Investment: A Closer Look

Recent reports from ProPublica indicate that Elon Musk’s space exploration company, SpaceX, has permitted investments from Chinese entities.

National Security Implications

These funds are channeled through offshore financial centers like the Cayman Islands. SpaceX functions as a defense contractor for the U.S. Department of Defense, undertaking crucial projects.

This includes the development of a classified spy satellite network. Accepting investment from China presents potential national security risks.

Such investment could potentially provide a geopolitical rival with access to sensitive military technologies, intelligence data, or critical supply chains.

Musk’s Ties to China

The revelations regarding SpaceX’s investment practices raise further scrutiny of Musk’s personal connections with China.

Reports suggest the Pentagon briefed Musk on the possibility of a conflict with China. Simultaneously, the executive advocating for reduced federal expenditure has consistently engaged with officials from the Chinese Communist Party to advance his business ventures.

Tesla’s manufacturing facility in Shanghai produces approximately half of the company’s vehicles, and China remains a substantial, though decreasing, market for Tesla’s sales.

Details from the Delaware Dispute

Information concerning SpaceX’s approach to investment surfaced during a recent corporate dispute in Delaware.

Testimony was provided by SpaceX’s CFO, Bret Johnsen, and significant investor Iqbaljit Kahlon. The dispute revolved around a cancelled $50 million stock purchase agreement with a Chinese firm in 2021.

Following public disclosure of the deal, SpaceX executives withdrew to mitigate potential issues with national security regulators.

Offshore Vehicles and Concealed Ownership

Kahlon testified that SpaceX deems it “acceptable” for Chinese investors to acquire company shares via offshore entities.

These entities are frequently utilized to maintain investor anonymity. Experts consulted by ProPublica expressed concern that this practice suggests deliberate efforts to obscure foreign ownership interests.

SpaceX has not yet responded to requests for comment regarding the rationale behind this approach.

CFIUS Review and Investment Strategies

While passive, noncontrolling investments from foreign sources are generally permitted, the previous administration maintained that adversaries like China employ concealed investment tactics.

These tactics are used to acquire technologies, intellectual property, and strategic leverage within key industries. Consequently, such investments are typically subject to review by the Committee on Foreign Investment in the United States (CFIUS).

Currently, there is no publicly available record indicating that SpaceX has undergone a formal CFIUS review. TechCrunch has contacted both CFIUS and SpaceX for further information.

Financial Times Investigation

ProPublica’s findings align with a prior investigation by the Financial Times.

The Financial Times discovered that Chinese investors are leveraging special-purpose vehicles to discreetly channel millions of dollars into companies controlled by Musk, including SpaceX, xAI, and Neuralink.