US sanctions 8 Chinese AI tech companies - SenseTime (HK) on the list
Ahead of the China-U.S. trade talks, the U.S. Commerce Department announced sanctions on a list of 28 Chinese public security bureaus and companies which includes 8 companies involved in artificial intelligence technologies. Amongst them is Hong Kong-based “unicorn” SenseTime, Megvii (which filed for IPO with HKEX) and Shenzhen-based Hikvision.
The U.S. Commerce Department claimed that these companies on the “Entity List” have assisted the Chinese government and participated in activities which violate human rights of Muslim minorities such as the Uyghurs in the province of Xinjiang. This is the first time the U.S. government has placed sanctions on Chinese companies for human rights violations. The Chinese government has condemned the US for meddling with what they consider to be internal affairs in China. The Chinese Commerce Department expressed their opposition of the U.S. for unilaterally applying U.S. laws on Chinese entities.
The use of facial recognition in surveillance of activities in Xinjiang
Following the placement of Huawei on the entity list in May, the U.S. Commerce Department announced a new list of sanctioned companies including the Xinjiang Uyghur Autonomous Region People’s government Public Security Bureau and its 19 subordinate government agencies as well as eight commercial firms. These entities are being accused of suppression of human rights in the form of “repression, mass arbitrary detention and high-technology surveillance against the Uyghurs, Kazakhs, and other members of the Muslim minority groups”. Companies on this entity list are forbidden from buying products and services from U.S. companies without the approval of the U.S. government.
Wilbur Ross, Secretary of the U.S. Department of Commerce, issued a statement saying that the White House and the U.S. Department of Commerce will not tolerate the inhumane ethnic cleansing of minorities in China. The newly updated entity list will ensure that American technology will not be used in oppressing China’s vulnerable minorities.
The 8 commercial firms added to the list include leading artificial intelligence and surveillance equipment companies. Amongst them are 4 companies listed on the Shenzhen Stock Exchange - Hikvision, Zhejiang Dahua Technology, IFLYTEK Co, Xiamen Meiya Pico Information Co. The rest includes 3 unicorn firms, specializing in facial recognition technology - SenseTime, Megvii and Yitu Tech.
SenseTime, an AI start-up based in Hong Kong, was estimated to be worth 7.5 billion USD according to a report from last month. Its surveillance equipment had been rumoured to be in use in mainland China. Megvii, which filed for an IPO with the HKEX, was reported to be worth around 4 billion USD. At this time, it is not clear whether this will have any impact on its IPO which is estimated to attract at least 500 million USD of capital.
SenseTime made a statement on social media strongly objecting to being placed on this entity list and urged the US government to reassess their decision. The company claimed that they have strictly followed the rules and regulations of the countries and regions involved, and that they have upheld high ethical standards in the application of artificial intelligence so that it may be put into proper use.
Ministry of Foreign Affairs of PRC criticizes the meddling of domestic affairs and may retaliate Hikvision, with an estimated market value of 42 billion USD, is known to be the world’s largest video surveillance equipment producer. Back in May of this year, there were rumours that the White House had intentions of blacklisting the company. On a public statement yesterday, Hikvision voiced their strong opposition and believes that the U.S. Commerce Department’s decision was based on unsubstantiated claims. The company’s U.S. spokesman said that “punishing Hikvision, despite these engagements, will deter global companies from communicating with the U.S. government, hurt Hikvision’s US businesses partners and negatively impact the U.S. economy”. He urged the U.S. government to reconsider its decision and remove Hikvision from the entity list. Both Hikvision and Zhejiang Dahua Technology have temporarily suspended trading of their shares on the Shenzhen Stock Exchange.
In a press conference, Geng Shuang, the spokesperson for the Foreign Ministry of PRC, reiterated PRC’s strong opposition of U.S. blacklisting these Chinese technology companies for the reason of human rights violation. He criticized the U.S. government for meddling with China’s internal political affairs and in turn, damaging Chinese interests.
When asked if China will retaliate against the U.S. government, Geng Shuang responded by saying China will “take firm and strong measures to resolutely defend its sovereignty, security and development interests.'' He emphasized that Xinjiang issues fall under the realm of China’s domestic affairs and other countries do not have a right to intervene. Geng also pointed out that “so-called human rights issue in Xinjiang claimed by the U.S. is actually non-existent”. He accused the U.S. of making up an excuse to meddle in China’s internal politics and urged the U.S. government to rescind its decision.
Source: Hong Kong Economic Journal Oct 8, 2019