U.S. black­lists 8 firms; China says ‘stay tuned’

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China sig­naled that it would hit back af­ter Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion placed eight of the coun­try’s tech­nol­ogy gi­ants on a black­list over re­ported hu­man-rights vi­o­la­tions against Mus­lim mi­nori­ties. At the same time, the Trump ad­min­is­tra­tion is mov­ing ahead with dis­cus­sions around pos­si­ble re­stric­tions on port­fo­lio flows into China, with a par­tic­u­lar fo­cus on in­vest­ments made by U.S. govern­ment re­tire­ment funds, peo­ple fa­mil­iar with the in­ter­nal de­lib­er­a­tions said.

Asked Tues­day whether China would re­tal­i­ate over the tech­nol­ogy black­list, For­eign Min­istry spokesman Geng Shuang told re­porters “stay tuned.” He also de­nied that the govern­ment abused hu­man rights in the far west re­gion of Xin­jiang.

“We urge the U.S. side to im­me­di­ately cor­rect its mis­take, with­draw the rel­e­vant de­ci­sion and stop in­ter­fer­ing in China’s in­ter­nal af­fairs,” Geng said in Bei­jing. “China will con­tinue to take firm and force­ful mea­sures to res­o­lutely safe­guard na­tional sovereignt­y, se­cu­rity and devel­op­ment in­ter­ests.”

The Trump ad­min­is­tra­tion’s move, which was an­nounced af­ter U.S. mar­kets closed, came on the same day as ne­go­tia­tors from the two sides be­gan work

ing-level prepa­ra­tions for high-level talks set to be­gin Thurs­day in Wash­ing­ton. A U.S. Com­merce Depart­ment spokesman said the “ac­tion is un­re­lated to the trade ne­go­ti­a­tions,” and China con­firmed that Vice Premier Liu He would lead the del­e­ga­tion as planned.

The black­list, first re­ported by Reuters, still takes Pres­i­dent Don­ald Trump’s eco­nomic war against China in a new di­rec­tion, mark­ing the first time his ad­min­is­tra­tion has cited hu­man rights as a rea­son for ac­tion. Past moves to black­list com­pa­nies such as Huawei Tech­nolo­gies Co. have been taken on na­tional se­cu­rity grounds.

China has plowed bil­lions of dol­lars into com­pa­nies de­vel­op­ing ad­vanced hard­ware and soft­ware to catch up with the United States. Some of the com­pa­nies added to the list Mon­day are among the world’s most valu­able ar­ti­fi­cial-in­tel­li­gence star­tups.

Much of that tech­nol­ogy — in­clud­ing fa­cial recog­ni­tion and com­puter vi­sion — can be used to track peo­ple. That in­cludes smart­phone track­ing, voice-pat­tern iden­ti­fi­ca­tion and sys­tems that track in­di­vid­u­als across cities through pow­er­ful cam­eras. Wash­ing­ton of­fi­cials have grown in­creas­ingly wor­ried about China’s am­bi­tions to ex­port its sys­tems else­where, in­clud­ing places known for hu­man-rights abuses.

The com­pa­nies on the black­list in­clude two video sur­veil­lance com­pa­nies — Hangzhou Hikvi­sion Dig­i­tal Tech­nol­ogy Co. and Zhe­jiang Dahua Tech­nol­ogy Co. — that by some ac­counts control as much as a third of the global mar­ket for video sur­veil­lance and have cam­eras all over the world.

Also tar­geted were SenseTime Group Ltd. — the world’s most valu­able ar­ti­fi­cial in­tel­li­gence startup — and fel­low ar­ti­fi­cial in­tel­li­gence gi­ant Megvii Tech­nol­ogy Ltd., which is said to be aim­ing to raise up to $1 bil­lion in a Hong Kong ini­tial pub­lic of­fer­ing. Backed by Chi­nese e-com­merce gi­ant Alibaba Group Hold­ing Ltd., the pair are at the fore­front of China’s am­bi­tion to dom­i­nate ar­ti­fi­cial in­tel­li­gence devel­op­ment in com­ing years.

En­ti­ties on the list are pro­hib­ited from do­ing busi­ness with Amer­i­can com­pa­nies with­out be­ing granted a U.S. govern­ment li­cense, al­though some have main­tained re­la­tion­ships with banned com­pa­nies through in­ter­na­tional sub­sidiaries.

“Specif­i­cally, 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” in Xin­jiang, the U.S. Com­merce Depart­ment said in a Fed­eral Reg­is­ter no­tice pub­lished Mon­day.

The for­eign min­istry’s Geng ac­cused the U.S. of hav­ing “sin­is­ter in­ten­tions.” “The mea­sures taken by China to elim­i­nate ex­trem­ism from the roots are fully in line with Chi­nese law and in­ter­na­tional prac­tice,” he said.

SenseTime and Dahua weren’t im­me­di­ately avail­able for com­ment out­side of nor­mal busi­ness hours.

“Hikvi­sion strongly op­poses to­day’s de­ci­sion by the U.S. govern­ment and it will ham­per ef­forts by global com­pa­nies to im­prove hu­man rights around the world,” the com­pany said in a state­ment.

Megvii said the U.S. had “no grounds” to put it on the list, and noted that Hu­man Rights Watch had cor­rected a re­port that im­pli­cated the com­pany. It added that it hadn’t earned rev­enue from Xin­jiang in the first part of the year, and the im­pact on its busi­ness from the des­ig­na­tion was min­i­mal.

The move tar­gets Chi­nese sur­veil­lance com­pa­nies in­volved in the crack­down in Xin­jiang, where as many as a mil­lion Uighur Mus­lims have been placed in mass de­ten­tion camps, prompt­ing crit­i­cism from around the world. The White House in May had read­ied the sanc­tions pack­age for sur­veil­lance tech­nol­ogy com­pa­nies ac­cused of hu­man rights vi­o­la­tions, but de­cided to hold back be­cause of the trade ne­go­ti­a­tions.

Also to be placed on the Com­merce Depart­ment’s “en­tity list” are the Xin­jiang re­gion’s pub­lic se­cu­rity bureau and 18 other mu­nic­i­pal and county pub­lic se­cu­rity bu­reaus as well as the prov­ince’s po­lice col­lege.

Mean­while, the Trump ad­min­is­tra­tion ef­forts to re­strict in­vest­ment port­fo­lio flows into China are ad­vanc­ing even af­ter Amer­i­can of­fi­cials pushed back strongly against a Bloomberg News re­port late last month that a range of such lim­its was un­der re­view.

Ac­cord­ing to peo­ple fa­mil­iar with the meet­ings, the ad­min­is­tra­tion’s fo­cus is now on ways to fur­ther scru­ti­nize in­dex providers’ de­ci­sion to add Chi­nese firms they con­sider a ma­te­rial risk for Amer­i­can in­vestors. It’s still un­clear what le­gal author­ity the White House would rely on to force ma­jor in­dexes to drop cer­tain Chi­nese com­pa­nies.

At least one of the is­sues un­der con­sid­er­a­tion is time-sen­si­tive. The Fed­eral Re­tire­ment Thrift In­vest­ment Board in 2017 made a de­ci­sion that by mid-2020 the in­ter­na­tional fund of­fered to work­ers in the govern­ment’s re­tire­ment sav­ings plan would mir­ror the Morgan Stan­ley Cap­i­tal In­ter­na­tional All Coun­try World In­dex, which cap­tures emerg­ing mar­kets, in­clud­ing China. The board is sched­uled to meet Oct. 21.

Some U.S. law­mak­ers and China crit­ics out­side the govern­ment have pushed the board to re­verse that de­ci­sion and, if nec­es­sary, have the ad­min­is­tra­tion use ex­ec­u­tive power to pro­tect U.S. govern­ment work­ers. They ar­gue that Amer­i­cans are harmed by chan­nel­ing money into Chi­nese firms that are sus­pected of hu­man-rights vi­o­la­tions and at the cen­ter of U.S. na­tional se­cu­rity con­cerns.

The change would ex­pose al­most $50 bil­lion in re­tire­ment as­sets of fed­eral govern­ment em­ploy­ees, in­clud­ing mem­bers of the U.S. Armed Forces, to se­vere and undis­closed ma­te­rial risks as­so­ci­ated with many of the Chi­nese com­pa­nies listed on the in­dex, op­po­nents ar­gue.

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