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USA government blacklists more Chinese tech companies due to concerns on treatment of Muslim minorities

In October 2019, the US government widened its trade blacklist to include eight Chinese technology and artificial intelligence companies due to concerns on China’s treatment of Muslim minorities.

The US Commerce Department said these “entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.” Wilbur Ross, Secretary of Commerce, said that “The U.S. Government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China”.

The blacklisted companies are Hikvision, SenseTime Group Ltd, Megvii Technology Ltd, iFlytek Co, Zhejiang Dahua Technology, Xiamen Meiya Pico Information Co, Yitu Technology and Yixin Science and Technology Co. Comments from some of these companies are included in the article below.

The US government’s decision has also prompted at least two of the pension plans, the California State Teachers’ Retirement System (CalSTRS) and The New York State Teachers Retirement System, to say they are reviewing or monitoring that development.


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1 December 2019

Hong Kong: AI firm Megvii reportedly faces additional queries from HKEx on IPO application after blacklisted by US over alleged involvement in human rights violations

Author: Bloomberg (US)

“Chinese AI Giant Megvii Faces HKEX Queries on IPO Application”, 22 November 2019

Chinese artificial-intelligence giant Megvii Technology Ltd. is facing additional queries from the Hong Kong bourse ahead of its planned initial public offering, people familiar with the matter said.

Some questions relate to public complaints about whether the company adequately disclosed risks related to U.S. sanctions, the people said… Megvii…  will need to address the concerns before it receives formal clearance to go ahead with the share sale, the people said.

A recent online campaign has been encouraging people to send complaints to the listing committee and HKEX Chief Executive Officer Charles Li, lobbying the exchange not to approve Megvii’s listing application. A letter circulated online said Megvii breached the listing rules by failing to make adequate disclosures of sanction risks.

Megvii filed its IPO documents in August. The exchange’s queries aren’t necessarily an indication it will block the listing, and in some previous cases it has allowed a deal to go ahead after receiving a company’s explanations. A representative for Megvii declined to comment.

… The AI startup is among several Chinese companies that the Trump administration blacklisted over alleged involvement in human rights violations against Muslim minorities in China.

Megvii has said it “strongly objects” to the blacklisting and that the company complies with all regulations in the markets in which it operates…

[Also referred to Alibaba Group Holding Ltd., Ant Financial, Lenovo Group Ltd., China Mobile Ltd., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc.]

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11 November 2019

USA: Tech giants distribute products and apps from blacklisted Chinese companies, according to media report

Author: Rosalind Adams and Ryan Mac, Buzzfeed News

“Amazon, Apple, And Google Are Distributing Products From Companies Building China's Surveillance State”, 4 November 2019

Amazon, Apple, Google, and other technology giants are distributing physical goods and apps from Chinese companies that the US government has accused of abetting human rights violations, BuzzFeed News has found.

The goods and apps come from three companies — Hikvision, Dahua Technology, and iFlytek — which the US Commerce Department recently placed on an export blacklist for their role in aiding in the surveillance and detention of more than a million Uighur Muslims and other Muslim ethnic minorities in China’s northwest Xinjiang region… But it does not stop Amazon and eBay from selling their products in their own online marketplaces, or Google and Apple from distributing their apps to US consumers.

… BuzzFeed News counted hundreds of products from Dahua and Hikvision… and iFlytek… on Amazon, eBay, and Overstock. Apple and Google also collectively distributed more than 100 apps from the three Chinese companies on the Apple App Store and Google Play, the main marketplace for Android software…

The apps from Hikvision, Dahua, or iFlytek, which mostly relate to the operation of camera security equipment or speech recognition and translation, do not appear to violate the rules of Google or Apple’s app stores…

Representatives for Dahua, Hikvision, and iFlytek did not respond to requests for comment from BuzzFeed News. A spokesperson for the Commerce Department pointed BuzzFeed News to publicly available information on its entity list, but declined to comment on specific companies…

An Apple spokesperson said that the company takes “great care to curate the App Store,” adding that “all apps on the App Store must comply with local laws and cannot put individuals or groups in harm's way.”

While Apple does not believe it’s in violation of US law, the company was aware that companies blacklisted by the Commerce Department are not allowed to purchase or download exclusive software, toolkits, or frameworks. The spokesperson noted that apps from Hikvision, Dahua, and iFlytek sell their products around the world and that many of those apps are used by their customers to manage hardware like security cameras in typical situations.

Google acknowledged receiving BuzzFeed News’ questions but did not provide comment…

Dahua similarly had more than two dozen free-to-download apps through Apple’s App Store and at least 20 through Google’s. These apps offer options to control different surveillance systems, including one through Apple and two through Google Play that appear to be made for US home-security company ADT…

Asked about the mobile software, an ADT spokesperson declined to comment on the company’s relationship with Dahua and referred BuzzFeed News to the Security Industry Association, a security company trade group.

 “SIA strongly believes all technology products must only be used for purposes that are lawful, ethical and non-discriminatory, and we believe security technology should be a catalyst for good in the world,” a spokesperson for the group said in a statement. SIA declined to comment on ADT’s relationship with Dahua…

Maya Wang, a senior researcher at Human Rights Watch, said it was the responsibility of companies like Apple and Google to ensure that they are not further contributing to human rights abuses. She added that companies should also have due diligence policies that examine how consumer apps are collecting data…

… BuzzFeed News found that some of the US’s largest online marketplaces — Amazon, eBay, and Overstock — have allowed third-party sellers to advertise and sell products from Hikvision, Dahua, and iFlytek…

Amazon did not respond to multiple requests for comment.

… Overstock did not sell any Dahua products but offered 56 Hikvision listings that appeared to be mainly from one third-party seller…

“Overstock regularly reviews our website to ensure all sellers adhere to the terms of our prohibited items list,” a company spokesperson said in a statement. “We have notified the sellers of the potentially noncomplying products and removed those products pending review.”

An eBay spokesperson acknowledged BuzzFeed News’ inquiry about the products but did not comment…

 [Also referred to SenseTime, Megvii, and Yitu]

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17 October 2019

USA government's widened blacklist on Chinese tech companies prompts pension funds to monitor development

Author: Svea Herbst-Bayliss and Tim McLaughlin, Reuters

“U.S. pension funds took positions in blacklisted Chinese surveillance company”, 15 October 2019

Some of the biggest public pensions funds in the United States have invested in one of the world’s largest purveyors of video surveillance systems that the U.S. government claims are used in wide-scale repression of the Muslim population of western China.

The Trump administration’s decision to put the company, Hangzhou Hikvision Digital Technology Co… on a blacklist… has prompted at least two of the pension plans to say they are reviewing or monitoring that development…

“We are tracking the situation given this new development with the Department of Commerce’s announcement,” a spokeswoman for the California State Teachers’ Retirement System (CalSTRS) said in an email…

The New York State Teachers Retirement System also owned Hikvision…

“Our holdings are primarily held according to their weights in passive portfolios matching the MSCI ACWI ex-U.S. index, our policy benchmark. We are monitoring the situation,” said a spokesman for the teachers’ fund…

Hikvision’s General Manager Hu Yangzhong told Reuters… it has been talking to the U.S. government about Xinjiang and has hired human rights lawyers to defend itself against the blacklisting.

A spokeswoman for law firm Sidley Austin LLP, which has lobbied for Hikvision this year, declined to comment.

Another major fund investing in Hikvision shares is the Florida Retirement System (FRS)…

A spokesman for the fund said it was working closely with external money managers “related to the issue in order to meet all regulatory and fiduciary requirements.”…

Beijing denies any mistreatment of people at the camps, which it says provide vocational training to help stamp out religious extremism and teach new work skills.

Robinson [from RWR Advisory Group] said that many Americans are unwittingly owning shares in such companies because they are in index funds. “They are picked up by the index providers in sizable numbers and sluiced into U.S. investor portfolios with seemingly very little, if any, due diligence or disclosure in the categories of national security and human rights.”

MSCI Inc (MSCI.N), whose products are designed for global investors, added Hikvision to its benchmark emerging markets index last year. MSCI declined to comment.

One other company among the blacklisted eight that is owned by some of the big pension funds is iFlytek Co Ltd… Its shares were owned by funds in Florida, New York State as well as CalSTRS and the California Public Employees Retirement System (CalPERS) indirectly through the iShares MSCI Emerging Markets ETF at their last disclosure dates. IShares, a top ETF provider owned by BlackRock Inc (BLK.N), declined to comment…

The New York State Common Fund… liquidated its position… It had owned 2.7 million shares worth $14.2 million at the end of March through an external fund manager, but sold them in May, a spokesman said, declining to say why.

U.S. mutual funds have also cut or eliminated positions in Hikvision amid the negative publicity…

… One fund to pull out is the $2.7 billion Artisan Developing World Fund (APDYX.O)… Artisan did not respond to a request for comment…

The $33 billion Alaska Permanent Fund had considered an investment in a China fund featuring Hikvision as a top holding…

Schroders Global Asset Management, a finalist for the fund’s mainland China investment mandate, touted Hikvision as a top performer…

Some Alaska trustees… worried about “headline risks” of investing in companies that aid the Chinese government’s surveillance activities, according to the minutes…

Reuters could not determine whether Alaska made an investment in the Schroders fund that included Hikvision stock.

A spokeswoman for the Alaska Retirement Management Board, which oversees the pension, said it does not have any additional information to share regarding Schroders’ efforts. A Schroders spokesman declined to comment.

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8 October 2019

USA govt. widens trade blacklist to include eight Chinese artificial intelligence companies due to concerns on treatment of Muslim minorities

Author: David Shepardson & Josh Horwitz, Reuters

“U.S. expands blacklist to include China's top AI startups ahead of trade talks”, 8 Oct 2019

The U.S. government widened its trade blacklist to include some of China’s top artificial intelligence startups, punishing Beijing for its treatment of Muslim minorities…

The decision, which drew a sharp rebuke from Beijing, targets 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group Ltd and Megvii Technology Ltd.

The action bars the firms from buying components from U.S. companies without U.S. government approval…

The Commerce Department said in a filing the “entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.”

“The U.S. Government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China,” said Secretary of Commerce Wilbur Ross.

China said the United States should stop interfering in its affairs. It will continue to take firm and resolute measures to protect its sovereign security, foreign ministry spokesman Geng Shuang told a regular media briefing without elaborating…

The other companies on the list are speech recognition firm iFlytek Co, surveillance equipment maker Zhejiang Dahua Technology, data recovery firm Xiamen Meiya Pico Information Co, facial recognition firm Yitu Technology and Yixin Science and Technology Co.

A U.S. Hikvision spokesman said the company “strongly opposes” the decision and noted that in January it retained a human rights expert and former U.S. ambassador to advise the company on human rights compliance.

“Punishing Hikvision, despite these engagements, will deter global companies from communicating with the U.S. government, hurt Hikvision’s U.S. businesses partners and negatively impact the U.S. economy,” the company added…

SenseTime said in a statement it was deeply disappointed by the U.S. move, that it abides by all relevant laws of the jurisdictions in which its operates and that it has been actively developing an AI code of ethics to ensure its technologies are used responsibly.

Megvii said it strongly objected to being placed on the blacklist and that it required its clients not to weaponize its technology or use it for illegal purposes.

IFlytek said its placement on the blacklist would not affect its daily operations, while Xiamen Meiya said its overseas revenue was less than 1% of total revenue and that most of its suppliers were domestic companies…

In August, the Trump administration also released an interim rule banning federal purchases of telecommunications equipment from five Chinese companies, including Huawei and Hikvision.

Huawei has repeatedly denied it is controlled by the Chinese government, military or intelligence services and has filed a lawsuit against the U.S. government’s restrictions.

[Also referred to IPVM , Intel Corp, Nvidia Corp, Ambarella Inc, Western Digital and Seagate Technology]

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