Hikvision, a surveillance powerhouse, walks U.S.-China tightrope

    BEIJING (Reuters) – For China’s Hikvision, the world’s largest purveyor of video surveillance programs and a vendor to Xinjiang police companies, a second of reckoning could also be at hand. FILE PHOTO: People go to a Hikvision sales space at a safety exhibition in Shanghai, China May 24, 2019. REUTERS/Aly Song/File PictureSince Aug. 13, Hikvision has not been allowed to promote to U.S. federal authorities companies, due to a regulation handed final yr that blocked 5 Chinese corporations as potential safety threats as a result of their merchandise might enable entry to delicate programs. That has compelled the corporate – which pulls practically 30% of its 50 billion yuan ($7.12 billion) in income from abroad – onto a tightrope: it should assuage safety and human rights issues within the West with out angering the Chinese authorities, a significant buyer and an omnipotent regulator. The firm, referred to as Hangzhou Hikvision Digital Technology Co Ltd, is publicly attempting to distance itself from Xinjiang because it lobbies to ease U.S. restrictions. Hikvision signed 1.9 billion yuan value of public-private partnership contracts – value a mean of 370 million yuan every – with the police in Xinjiang between 2016 and 2017, the procurement paperwork present. Although the Xinjiang offers have shrunk because the U.S. Congress handed the ban final yr, beforehand unreported provincial authorities procurement paperwork reviewed by Reuters present that Hikvision surveillance tools was named in additional than 110 million yuan value of contracts with Chinese police, navy and courts there. The United Nations says that there are credible estimates of roughly one million individuals, principally from the Muslim Uighur minority, having been detained in Xinjiang with out formal fees. A Hikvision consultant mentioned the corporate “takes global human rights very seriously” and famous that its know-how additionally was utilized in outlets, site visitors management and business buildings. “We don’t know where and how our products being sold or being used,” the consultant mentioned of Xinjiang. “But all our business is required to align with the company’s compliance policy.” Hikvision declined to say what its compliance coverage was, however mentioned it was consistent with native legal guidelines. China’s Public Security Bureau and the Public Security Bureau of the Xinjiang Uighur Autonomous Region, the place the tendered tasks are positioned, didn’t reply to faxed requests for remark. Foreign buyers who as soon as piled into the corporate, together with UBS AG, have dumped at the very least 300 million shares of its inventory within the final 5 months, shareholder knowledge reveals, with some citing issues about its involvement in China’s increasing surveillance state within the Xinjiang area. “Hikvision needs to decide whether it wants to be a global company or … just be a China-based business,” mentioned one former high investor in Hikvision who bought his stake over human rights issues. He spoke on situation of anonymity as a result of he was not licensed to talk to the media. XINJIANG CONTRACTS The core of Hikvision’s enterprise is surveillance cameras, which have grow to be ubiquitous in lots of components of the world. It additionally sells rather more elaborate built-in programs, typically together with facial recognition know-how, in addition to offering {hardware} to different safety distributors. The tasks in 2016-17 embrace facial recognition and surveillance programs for mosques, the paperwork and Hikvision mentioned. Human rights teams say such cutting-edge mass surveillance is on the coronary heart of a marketing campaign of repression. Documents additionally listed such programs for a “training center” – the phrase utilized by Chinese authorities to explain what outdoors researchers say are internment camps. Hikvision confirmed its involvement in that undertaking. Since the U.S. procurement ban in August 2018, Hikvision know-how was talked about in at the very least 27 state-issued tenders in Xinjiang’s Uighur Autonomous Region, together with contracts to produce surveillance tools to the police, the navy and the courts. Collectively they have been value at the very least 110.5 million yuan, the procurement paperwork present. Many of the tenders are closely redacted to take away undertaking specifics, complete budgets and itemized prices. But a overview of 6 million yuan value of Hikvision know-how within the tenders reveals hundreds of the corporate’s surveillance cameras in addition to know-how to retailer and transmit knowledge. One undertaking from the Xinjiang Uighur Autonomous Region Public Security Department dated Sept. 28, 2018 requires 50 Hikvision digicam items value a complete of 425,000 yuan. Another undertaking, surveillance upgrades for a navy Communist Party committee in Urumqi value 510,000 yuan, listed Hikvision because the “main” tools provider in a procurement tender dated April 10, 2018. The firm’s know-how has additionally been utilized in at the very least 180 million yuan value of smaller contracts because the starting of 2018, together with business, navy and police tasks. The Hikvision consultant mentioned the corporate doesn’t all the time know the place its know-how is bought by way of third events. China’s Public Security Bureau and the Public Security Bureau of the Xinjiang Uighur Autonomous Region, didn’t reply to faxed requests for remark. Kevin Manning, a Commerce Department spokesman, declined to touch upon Hikvision and whether or not the company would add it to the Entity List, citing a coverage that the company doesn’t touch upon potential additions to the checklist. Reuters reported in May the administration was contemplating Huawei-like sanctions on Hikvision over China’s remedy of the Uighurs. And fears of China’s high-tech surveillance packages have spurred protester backlash in Hong Kong, which makes use of tools from Hikvision and different Chinese surveillance firms. INVESTOR EXODUS Despite the selloff by overseas buyers, Hikvision has continued to develop. Revenues for the primary half of 2019 have been up 14.6% over the earlier years to 23.9 billion yuan within the first-half. 29% of gross sales got here from abroad markets, in contrast with 30% a yr in the past, and practically half the income got here from “front-end products” similar to cameras. Hikvision is 42% owned by Chinese state buyers and its two key founders. As of Aug 6, buyers utilizing the Shenzhen-Hong Kong Stock Connect, which permits worldwide buyers to commerce Hikvision’s Chinese-listed inventory, held a complete of 582 million shares within the firm, down 34 % from 879.5 million shares on the finish of March, based on HKEX knowledge. Its inventory has fallen 4.2% over the last yr. The firm’s solely direct institutional overseas investor, UBS AG, which was Hikvision’s ninth-largest shareholder in March 2019, has since dropped out of the corporate’s high 10 buyers, firm knowledge confirmed. UBS declined to remark. Hikvision has begun lobbying efforts within the U.S. amid issues about how its surveillance tech is used. Hikvision’s U.S. subsidiary paid two lobbying organizations, the Glover Park Group and Sidley Austin, about $1.63 million in charges since June 2018 for work associated to the NDAA, based on public filings. Neither firm responded to requests for remark. The firm’s efforts to burnish its picture additionally embrace the general public launch of a 99-page environmental, social and governance report in April, which made no point out of Xinjiang. The report mentioned the corporate had employed U.S. regulation agency Arent Fox LLP up to now yr to conduct an inner overview to “better protect” human rights. Slideshow (2 Images)The overview, overseen by Arent Fox associate Pierre-Richard Prosper, a former U.S. Ambassador-at-Large for War Crimes Issues, included at the very least two journeys to China, the report mentioned. Hikvision confirmed the journeys included Xinjiang, however mentioned the agency had not but compiled a report of the journeys’ findings. Arent Fox and Prosper didn’t reply to requests for remark. Reporting by Cate Cadell. Additional reporting by Sijia Jiang, Brenda Goh and Sumeet Chatterjee in Hong Kong; Simon Jessop in London; and Luoyan Liu in Shanghai. Editing by Jonathan Weber and Gerry Doyle.Our Standards:The Thomson Reuters Trust Principles.

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