LDN - Business

After Huawei, U.S. could blacklist Chinese surveillance tech firm: media

[May 22, 2019] By Brenda Goh

SHANGHAI (Reuters) - The U.S. administration is considering Huawei-like sanctions on Chinese video surveillance firm Hikvision, media reports show, deepening worries that trade friction between the world's top two economies could be further inflamed.

The restrictions would limit Hikvision's ability to buy U.S. technology and American companies may have to obtain government approval to supply components to the Chinese firm, the New York Times reported https://nyti.ms/2MfgBS3 on Tuesday.

The United States stuck Huawei Technologies on a trade blacklist last week, effectively banning U.S. firms from doing business with the world's largest telecom network gear maker, in a major escalation in the trade war.

The United States has accused Huawei of activities contrary to national security, a charge Huawei denies. However, this week the Trump administration granted the firm a license to buy U.S. goods until Aug. 19 to minimize disruption for customers.

Huawei says it can ensure a steady components supply chain without U.S. help. A Hikvision executive echoed the sentiment.

"Even if the U.S. stops selling them to us we can remedy this through other suppliers," a Hikvision executive said on condition of anonymity given the sensitivity of the matter.

"The chips Hikvision uses are very commercial and most of the suppliers are actually in China," she said, but added the company had not been informed of any possible U.S. blacklisting.

The White House did not respond to a request for comment.

Bloomberg, citing people familiar with the matter, reported the U.S. government was deliberating whether to add Hikvision, security equipment maker Zhejiang Dahua Technology and several other unidentified firms to a blacklist.

A Dahua investment department employee declined to comment.

Hikvision, with a market value of more than $37 billion, calls itself the world's largest video surveillance gear maker.

Its products are used in public places in China, from Beijing to Xinjiang. Headquartered in high-tech Hangzhou, one of China's richest cities, it sells close-circuit TV products, traffic and thermal cameras, and unmanned aerial vehicles.

China's foreign ministry on Wednesday urged the United States to provide a fair environment for Chinese firms, in the wake of reports Hikvision could be blacklisted.

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A Hikvision logo is seen at an exhibition during the World Intelligence Congress in Tianjin, China May 16, 2019. REUTERS/Jason Lee/File Photo

"Recently we have repeatedly expressed China's position of opposing the United States' abuse of national power to wilfully smear and suppress other countries' companies, including Chinese companies," ministry spokesman Lu Kang said at a briefing.

China requires its companies to abide by international norms when investing abroad, but "at the same time we always demand that other countries give Chinese enterprises fair and non-discriminatory treatment", he added.

UIGHUR CONNECTION

Shares in Hikvision, 42% held by state-owned firms, opened 10% lower on Wednesday. It later pared some losses to trade down 6%. Dahua shares slumped as much as 9.2%.

Jefferies analyst Rex Wu downplayed the impact of a possible ban on Hikvision, saying the United States accounted for roughly 5% of the company's sales.

"Most AI solutions are sold to the government, public and enterprise sectors in China. Hikvision may be able to acquire GPU (graphics processing unit) via local distributors," Wu said.

Hikvision and Dahua were specifically cited in a letter to U.S. President Donald Trump's top advisers last month, signed by more than 40 lawmakers, which called for tighter U.S. export controls over China's treatment of Muslim minority.

China has faced growing global condemnation for setting up facilities in its western region of Xinjiang that U.N. experts describe as mass detention centers holding more than 1 million ethnic Uighurs and other Muslims.

Beijing has said its measures in Xinjiang, which reportedly also include widespread surveillance, are aimed at stemming the threat of Islamist militancy. The camps that have opened are vocational training centers, it has said.

In a separate email on Wednesday, a Hikvision spokeswoman said the firm took these concerns seriously and had since last October been engaging with the U.S. government on the subject.

(Reporting by Brenda Goh in Shanghai; Additional Reporting by Rama Venkat and Philip George in Bengaluru, Michael Martina in Beijing and the Shanghai Newsroom; Editing by Sayantani Ghosh and Himani Sarkar)

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