US adds Hikvision, Sensetime, and Megvii to trade blacklist

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CCTV surveillance cameras Hikvision Frank Hersey
Surveillance cameras including Hikvision models for sale in a Beijing electronics market (Image credit: TechNode/Frank Hersey)

The US Commerce Department on Monday placed 28 Chinese government agencies and companies, including video surveillance gear maker Hikvision and artificial intelligence firms SenseTime and Megvii, on a trade blacklist over Beijing’s alleged treatment of Uighur Muslims and other predominantly Muslim ethnic minorities in the Xinjiang Uighur Autonomous Region.

Why it matters: The move came just three days before the visit of Chinese vice-premier Liu He to restart high-level trade talks with Washington to end a yearlong trade war between the world’s biggest economies.

  • The Commerce Department, however, said the announcement was not tied to this week’s resumption of trade talks with China.
  • Being added to the trade blacklist bars entities from buying components and technology from American companies without US government approval.
  • A similar move against Chinese telecommunications equipment maker Huawei has forced the companies to lower revenue forecasts by $30 billion in the next two years and made it difficult for the company to sell new smartphones in overseas markets.

Details: The organizations added to the so-called “Entity List” include the Xinjiang Uighur Autonomous Region People’s Government Public Security Bureau, 19 subordinate government agencies, and eight commercial firms across China, according to a Commerce Department filing.

  • The companies include Hangzhou-based Hikvision and Dahua Technology, two of the world’s largest manufacturers of video surveillance gear.
  • The list also includes some of China’s largest artificial intelligence startups such as Sensetime, the world’s most valued AI private company, Alibaba-backed facial recognition firm Megvii, and another facial recognition software maker Yitu, as well as iFlytek, a Shenzhen-listed voice recognition software maker.
  • A US Hikvision spokesperson said on Monday the company “strongly opposes today’s decision by the US government” and that the move could “hurt Hikvision’s US business partners and negatively impact the US economy,” according to Reuters.
  • Hikvision, with a market value of about $42 billion, receives nearly RMB 15 billion (around $2.1 billion) in revenue, or 30% of its total revenue, from overseas. The company said in May that it retained a human rights expert and former U.S. ambassador Pierre-Richard Prosper to advise the company regarding human rights compliance.
  • Beijing-based Megvii said in a statement (in Chinese) on Tuesday that the company “vigorously protests the decision” made by the US Commerce Department and it will keep communicating with the agency.
  • Sensetime said in a statement (in Chinese)Tuesday that the company “strongly opposes” the decision and urged the US government to reconsider the case.
  • Yitu shares Sensetime’s attitude towards the US sanctions, adding that the company wishes to be treated by the US government fairly, according to a statement by the company on Tuesday.

Context: The move comes as two of the AI startups have started their plans to go public on China’s Nasdaq-style tech board and the Hong Kong Stock Exchange.

  • Megvii has in August filed in Hong Kong to conduct an initial public offering targeting proceeds of at least $500 million, according to Reuters.
  • Shanghai-based Yitu is also considering a listing on China’s Star Market as early as this year, Bloomberg reported last month, citing people familiar with the matter.
  • New York-based Human Rights Watch said in June that its review of the Integrated Joint Operations Platform (IJOP) app, one of the mass surveillance systems used by the police and other authorities in Xinjiang, found that Megvii “seems not to have collaborated” in the development of that app, reversing the organization’s initial description that the IJOP app used a “facial recognition functionality” made by Megvii to “check whether the photo on the ID matches the person’s face or for cross-checking pictures on two different documents”.
  • Sensetime has opted out of operations in Xinjiang by selling out its 51% stake in a security joint venture in the region, the Financial Times reported in April.

The story has been updated to include Yitu’s statement in the Details section.