The State Department in August urged U.S. universities to protect “the integrity of our democracy” and consider, among other things, divesting from Chinese companies listed on U.S. stock exchanges in advance of a U.S. government review that may lead to their delisting. This issue now joins a growing list of U.S.-China tensions ranging from trade to finance to technology to global infrastructure.

The alert came in an Aug. 18 letter from Undersecretary Keith Krach, who warned of “the authoritarian influence of the Chinese Communist Party,” China’s ruling regime since 1949. But what is the extent of Chinese government control over private firms? Volumes of research by specialists on China’s political economy conclude that the government’s role has expanded in everything from domestic technology firms to foreign-owned multinationals.

In recent research, my co-author Hao Chen and I take a deeper look at Chinese government investment in “private” firms in China. We find that the government has become a significant investor in all sorts of firms in China. But we don’t find evidence that government investment or involvement necessarily makes Chinese firms effective agents in carrying out Beijing’s interests.

Government money is everywhere in the Chinese economy

The Chinese government is increasingly invested in all kinds of Chinese firms, well beyond those owned by the state. Here’s how we know this — first, we used Chinese corporate filings to collect information on the ownership and assets of China’s largest 1,000 investment firms. We found that central and locally owned firms together control more than 90 percent of those assets.

Second, we find that, especially since China’s stock market crisis of 2015, government shareholding firms are widely present in listed firms in China, holding minority shares in over 2,500 listed firms.

And third, we know from the analysis of China’s recent drive to push domestic innovation in high technology — Made in China 2025 — that this plan relies on large industry funds. These funds are supposed to channel both public (i.e., government money) and private investment into sectors like semiconductors, artificial intelligence and quantum computing.

U.S. policymakers treat private and state-owned Chinese firms with equal suspicion

Once upon a time, politicians and academics in the United States thought that private sector growth would foster demand among Chinese citizens for further economic and political liberalization. This was a main argument in favor of China’s entry into the World Trade Organization. Decades later, however, a number of U.S. policymakers and analysts share a growing hostility toward all Chinese firms, regardless of whether they are “private” or “state-owned.”

Driving this view are U.S. concerns that the Chinese government could commandeer any Chinese firm’s assets — whether real estate in the United States or data about Americans. These fears flow generally from the increasingly tight controls of the Chinese regime under Xi Jinping, who assumed leadership of the party and state in 2012; and from new laws and regulations in China and Hong Kong that broaden Beijing’s reach.

But not all Chinese firms are faithful agents of the regime

In my research, I find many cases where firms with state funding and political connections actually subvert Beijing’s interests, intentionally or not. China’s global ambitions in the semiconductor industry, for instance, were partly foiled when a politically connected and state-funded Chinese firm made an apparent bid for a U.S. firm, Micron, a supplier to the U.S. military.

That bid was never likely to be approved by CFIUS, the U.S. committee that reviews certain foreign investments in the United States — and the bold move attracted unwanted political attention to China’s efforts to acquire semiconductor technologies. That firm’s CEO was allegedly a close friend of Xi, but was forced into retirement after his management of government funds generated international backlash, including new U.S. legislation requiring an expanded review of Chinese investment in the United States. By the end of 2018, Chinese investment in U.S. tech companies had fallen to negligible levels.

CEFC China Energy, a privately owned company with billions of dollars invested across Eastern Europe, Africa and the Middle East, is another case study. Press reports detail how the company cultivated relationships with political and business elites abroad by implying deep ties with Chinese leaders and associating itself with China’s promises to bring growth and connectivity to the world. But the company’s bribery practices — and involvement in high-level politics in the Czech Republic — attracted the ire of Western officials. Chinese authorities detained CEFC’s head, tycoon Ye Jianming, in March 2018.

In countries like Sri Lanka and Malaysia, politicized real estate and infrastructure projects have made relations with China a major issue in national elections. This compromised, rather than advanced, Beijing’s vision of Chinese infrastructure investment as a “global win-win,” as China’s leaders describe the Belt and Road Initiative.

Government funding also tends to generate waste and corruption. One Chinese firm, created in 2013 to be a national-level investment company to allocate capital to promising firms in frontier industries, allegedly engaged in corruption and self-dealing, leaving Beijing $40 billion in debt. In 2015, top officials at China’s securities regulatory authority were prosecuted for corruption and investigated for insider trading following government intervention in the stock market crash that year. The government injected more than 1 trillion RMB ($150 billion) in public funds meant to bail out firms and ease the crash, but brokers instead colluded with those looking to sell their shares.

Beware of overestimating the Chinese government’s influence

Examples like these help explain Beijing’s new monitoring entities and the extension of the government’s anti-corruption campaign to sites of foreign investment — these are efforts to rein in the overseas actions of state-owned and private firms alike. My research further illustrates that the Chinese government’s heavier hand in the economy in recent years does not mean that its intentions always translate into reality. Reading every action of a Chinese firm as part of Beijing’s plan leads us to misunderstand, and potentially overreact to, China’s motives and power.

Meg Rithmire is the F. Warren McFarlan associate professor of business administration at Harvard Business School, and faculty affiliate at the Fairbank Center for Chinese Studies.