These alleged infractions are just the beginning of my worries. Mr. Musk’s business ventures are heavily reliant on China. He borrowed at least $1.4 billion from banks controlled by the Chinese government to help build Tesla’s Shanghai gigafactory, which was responsible for more than half of Tesla’s global deliveries in the third quarter of 2024.
China does not tend to give things away. The country’s laws stipulate that the Communist Party can demand intelligence from any company doing business in China, in exchange for participating in the country’s markets.
It's not just reliant on China, it's partly owned by Chinese investors.
Elon Musk’s aerospace giant SpaceX allows investors from China to buy stakes in the company as long as the funds are routed through the Cayman Islands or other offshore secrecy hubs, according to previously unreported court records.
Experts called SpaceX’s approach unusual, saying they were troubled by the possibility that a defense contractor would take active steps to conceal foreign ownership interests.
The legal dispute centers on an aborted 2021 deal, when SpaceX executives grew angry after news broke that a Chinese firm was going to buy $50 million of the company’s stock. SpaceX then had the purchase canceled. In separate testimony, the rocket company’s CFO explained that the media coverage was “not helpful for our company as a government contractor.” SpaceX’s business is built on those contracts, with the U.S. government paying the company billions to handle sensitive work like building a classified spy satellite network.
Federal law gives regulators broad power to oversee foreign investments in tech companies and defense contractors.
The
U.S. government charges that China has a systematic strategy of using even minority investments to secure leverage over companies in sensitive industries, as well as to gain privileged access to information about cutting-edge technology. U.S. regulators view even private investors in China as potential agents of the country’s government, experts said.
In addition to Tesla’s sprawling factory in Shanghai, last year, almost 40% of Tesla’s sales were to Chinese customers. The company has also secured major tax breaks and regulatory victories in the country. In 2019, the Chinese premier offered Musk the country’s equivalent of a green card.
Last week,
The New York Times reported that Musk was scheduled to get a briefing on secret plans for potential war between China and the U.S.
[While nothing seems obviously illegal] “It is certainly a policy of obfuscation,” Andrew Verstein, a UCLA law professor who has studied defense contractors, said of the SpaceX testimony. “It hints at potentially serious problems. We count on companies to be forthright with the government about whether they’ve taken money from America’s rivals.”
