Chinese investors have pumped in more than $30 million in Elon Musk’s SpaceX, xAI and Neuralink over the last two years, with asset managers luring them in by citing close ties between the billionaire and US President Donald Trump, the Financial Times has reported.
In one case cited by the FT, a China-based asset manager was recently inviting investments as small as $200,000 per person for SpaceX.
A representative from the firm told the FT they were expecting the space technology company to triple its valuation to $1.1 trillion in the next three years partly due to “comprehensive” backing “from the US government and military.”
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Wealthy Chinese have managed to continue investing in Musk’s businesses, despite deteriorating ties between Beijing and Washington, by using an arrangement that hides their identities from becoming public, the FT report added.
The arrangement, known as special-purpose vehicles, involves pooling funds from investors into a Cayman Islands-registered entity. The entity then moves that money into US-based funds managed by Western private equity firms, that already invest in Musk’s businesses.
Asset managers enabling the investments have been telling clients that the arrangement is specifically designed to remove the need for disclosures.
The paper clarified that while SPVs are not illegal, and are commonly used for financing businesses, it is the flow of Chinese capital into Musk’s businesses that raises concern, considering he is currently closely tied to US policy and government.
“How can someone in Musk’s position have so many connections to China but still be a good person to reform the US government?” Derek Scissors, a senior fellow at the American Enterprise Institute told the FT.
Scissors added that the investments showed Musk was “more interested in his reputation and his brand in China than he is in American interests”.
Musk’s China ties
Musk is known to have close ties with top Beijing leaders, with Chinese Premier Li Qiang having paved the way for electric vehicle and battery-maker Tesla to set up gigafactories in Shanghai.
Last year, during a trip to China, Musk reportedly told Li that Tesla was “willing to further deepen cooperation with China”. Tesla’s business in China is also a significant driver of Musk’s wealth, considering the carmaker’s sales in the country were a bright spot in overall gloomy numbers – until recently.
Musk’s effective closeness with Beijing has been in the limelight since Trump’s election win and return to the White House, with critics saying “Beijing may try to exert leverage with Elon Musk in a bid to win favourable US policies.”
“To the question of Elon Musk, I do believe that the CCP will try and leverage any opportunity,” one US lawmaker said in February.
Meanwhile, some critics have also said that Musk’s recent cuts to US government budget and personnel — that has slashed USAID’s outlay and led to thousands of layoffs — are “in service of his personal financial interests — and the Chinese government.”
Still, Musk’s close ties with Trump led Tesla stock to jump more than 70% last year, with much of the gains coming post Trump’s election victory. That rally has unraveled this year, however, amid a plunge in Tesla’s EV sales.
Nasdaq-listed shares of Tesla have slumped more than 35% so far this year and were down nearly 8% on Monday.
Can Chinese SPV investments influence Musk?
Amid those worries, an increasing influx of Chinese investments in Musk’s companies is bound to be concerning.
According to the FT, the SPV arrangement has made it difficult to assess the full scale of Chinese capital that has — and continues — to flow into Musk’s private companies. The presence of the Chinese funds is also not visible in public records of the companies, FT noted.
But the report also said that the investments were mainly driven by a hunt for profits. It cited people involved in the deals to report that the investments had “little to do with technology transfer or influencing public policy”.
The SPV arrangement also meant that Chinese investors were receiving only limited information about company financials and performance.
The influx of investments has also been driven by a lack of investment opportunities in China, where the economy has been stumbling and consumer spending has sputtered.
“China is facing an oversupply of capital and a shortage of high-quality projects,” one US-based investment manager told the paper.
- Vishakha Saxena
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