WASHINGTON (NYTIMES, REUTERS) - The Trump administration is considering limits to a Chinese video surveillance giant's ability to buy US technology, people familiar with the matter said, the latest attempt to counter Beijing's global economic ambitions.
The move would effectively place the company, Hikvision, on a US blacklist. It also would mark the first time the Trump administration punished a Chinese company for its role in the surveillance and mass detention of Uighurs, a mostly Muslim ethnic minority.
The move is also likely to inflame the tensions that have escalated in President Donald Trump's renewed trade war with Chinese leaders. The president, in the span of two weeks, has raised tariffs on US$200 billion (S$275 billion) worth of Chinese goods, threatened to tax all imports and taken steps to cripple Chinese telecom equipment giant Huawei. China has promised to retaliate against US industries.
China's Foreign Ministry said on Wednesday (May 22) that China opposes the US smearing Chinese companies. China urges the US to provide a fair and non-discriminatory environment for Chinese firms, ministry spokesman Lu Kang told a daily news briefing.
Hikvision is one of the world's largest manufacturers of video surveillance products and is central to China's ambitions to be the top global exporter of surveillance systems. The Commerce Department may require that US companies obtain government approval to supply components to Hikvision, limiting the company's access to technology that helps power its equipment.
Administration officials could make a final decision in the coming weeks.
Reports of the proposed US' move caused shares of Hikvision to five as much 9.6 per cent before recovering to be 6.2 per cent lower as of 9.50am in Shenzhen stock exchange.
The combination of more traditional surveillance equipment with new technologies, like artificial intelligence, speech monitoring and genetic testing, is helping make monitoring networks increasingly effective - and intrusive.
Hikvision says its products enable its clients to track people around the country by their facial features, body characteristics or gait, or to monitor activity considered unusual by officials, such as people suddenly running or crowds gathering.
The potential crackdown stems from the Trump administration's belief that China poses an economic, technological and geopolitical threat that cannot be left unchecked.
The US has targeted Chinese technology companies like Huawei that it believes could pose a national security threat given deep ties between the Chinese government and industry and laws that require Chinese firms to hand over information.
Adding to those concerns are the global human rights implications of China's extensive surveillance industry, which it increasingly uses to keep tabs on its own citizens.
The Chinese have used surveillance technology, including facial recognition systems and closed-circuit television cameras, to target the Turkic-speaking Uighurs, who have accused the Chinese government of discriminating against their culture and religion.
China has constructed what amounts to a police state in the country's northwest region of Xinjiang, which Uighurs consider their homeland. That includes extensive surveillance powered by companies like Hikvision and barbed wire-ringed internment compounds that US officials estimate have held 800,000 to as many as 3 million Muslims.
China has begun exporting this technology to nations that seek closer surveillance of their citizens, including Ecuador, Zimbabwe, Uzbekistan, Pakistan and the United Arab Emirates.
Since last year, administration officials have debated what to do about China's attempts to clamp down on the cultural and religious practices of the Uighurs. But they have refrained from taking action, in part because some American officials worried a move would derail attempts to win a trade deal with China.
Secretary of State Mike Pompeo said in an interview with Fox News on May 2 that the administration was concerned "that the Chinese are working to put their systems in networks all across the world so they can steal your information and my information."
He mentioned the Muslim internment camps, adding "this is stuff that is reminiscent of the 1930s that present a real challenge to the United States, and this administration is prepared to take this on."
Since trade talks with Beijing nearly crumbled early this month, the administration has quickly ramped up economic pressure on China.
It is moving ahead with plans to tax an additional US$300 billion in products and announced a sweeping executive order cutting off Huawei from purchasing the US software and semiconductors it needs to make its products.
While US companies can try to obtain a license to continue doing business with Huawei, firms like Google are making plans to curtail the products and services that they supply.
The administration is also attempting to prosecute a top Huawei executive, Meng Wanzhou, who faces criminal charges in the US and is under house arrest in Canada, where she awaits a court decision on extradition.
The measure against Hikvision would operate similarly to Huawei's license requirement. The Commerce Department would place it on an "entity list," which requires designated foreign companies and US companies to get US government approval before they do business with one another.
"Taking this step would be a tangible signal to both US and foreign companies that the US government is looking carefully at what is happening in Xinjiang and is willing to take action in response," said Ms Jessica Batke, a former State Department official who has done research in Xinjiang and testified before Congress on the issue.
"At the same time, however, the ongoing trade war perhaps undercuts the perception that this is coming from a place of purely human rights concerns."
The Commerce Department and the White House declined to comment. Hikvision did not respond to a request for comment.
Hikvision is little-known in the US, but the company supplies large parts of China's extensive surveillance system. The company's products include traffic cameras, thermal cameras and unmanned aerial vehicles, and they now allow Chinese security agencies to monitor railway stations, roads and other sites.
It is not immediately clear what effect a US ban would have on Hikvision's business. The company appears to source just a small portion of its components from the US, and any such ban could speed its efforts to switch to Chinese suppliers.
But Hikvision does have a growing international presence, and its executives have warned in the past about the potential for growing anti-China sentiment in the US to affect its operations.
The company says it has more than 34,000 global employees and dozens of divisions worldwide, and it has supplied products to the Beijing Olympics, the Brazilian World Cup and the Linate Airport in Milan. It has tried to expand into North America in recent years, employing hundreds of workers in the US and Canada, setting up offices in California and building a North American research and development team headquartered in Montreal.
Members of US Congress from both parties have called on the administration to impose sanctions on companies involved in aiding China's persecution of Muslims, including Hikvision.
In an August 2018 letter, legislators also urged the Commerce Department to strengthen its controls over technology exported to these companies, and called on the government to increase disclosure requirements for publicly traded companies that might be complicit in human rights abuses.
Hikvision and Dahua, another company cited by lawmakers, are both listed on the Shenzhen stock exchange. MSCI, one of the largest index providers in the US, added Hikvision to its benchmark emerging markets index last year. UBS and JP Morgan are among the company's top 10 shareholders, according to Hikvision.
US representative Adam Schiff said in an interview that the House Intelligence Committee, which he leads, could scrutinise more closely US companies that are investing in or partnering with Chinese firms that are building up the Chinese surveillance state.
Congress and the administration have responded with other measures that may clamp down on Hikvision's business. Congress included a provision in its 2019 military spending authorisation bill that banned federal agencies from using Chinese video surveillance products made by Hikvision or Dahua.
The Trump administration is also considering imposing sanctions on specific Chinese officials known to play critical roles in the surveillance and detention system in Xinjiang. These sanctions would be imposed under the Global Magnitsky Act. The highest-ranking official being considered for this type of targeted sanction is Mr Chen Quanguo, a member of the party's Politburo and party chief of Xinjiang since August 2016.
The State Department and White House National Security Council support imposing the sanctions, but officials at the Treasury Department have pushed back, citing a desire not to upset the trade talks, even though those have bogged down. Treasury Secretary Steven Mnuchin has advocated maintaining strong business ties with China.
The Commerce Department is also working on new restrictions on the types of potentially sensitive US technology that can be exported to foreign businesses, which are likely to touch on artificial intelligence and 5G capabilities.