Investment in Chinese biometrics firms Megvii and SenseTime by U.S. institutions draws scrutiny

Jun 11, 2019 | Chris Burt

Several U.S. lawmakers from both parties have expressed concerns about investment in Chinese facial recognition unicorns Megvii and SenseTime by Americans and America-based investment funds and institutions, BuzzFeed News reports.

In May BuzzFeed News reported that numerous U.S. organizations, including the Rockefeller Foundation, Princeton University, and the California Public Employees’ Retirement System, have directly or indirectly invested in the companies. Megvii has been reportedly considered for inclusion on the U.S. ‘unreliable entity’ blacklist, though the company was recently cleared of briefly-alleged involvement with China’s extensive surveillance of its Muslim minority.

A bipartisan group of senators are backing a Uyghur Human Rights Policy Act co-sponsored by Florida Senator Marco Rubio, which would bring sanctions against individuals and companies participating in human rights abuses in Xinjiang Province. Several of the Senators represent states where public employees’ unions have indirect investments in one or both of the companies.

“China uses its growing and unfettered access to America’s over $30 trillion capital markets to help finance its military threats, espionage, and egregious human rights abuses,” Rubio told BuzzFeed News in a statement. “We must stop this, period.”

“I would encourage any American-run fund to examine their investments and seriously consider divesting from companies whose technologies are being used to commit these abuses,” said Senator Jeff Merkley. Merkley represents Oregon, the state treasury of which is an indirect investor in Megvii through GGV Capital.

The Los Angeles County Employees Retirement Association (LACERA) told BuzzFeed News that it has contacted private equity company Silver Lake, which backs SenseTime, to discuss the investment, but other groups reached by the publication did not indicate any plans to re-evaluate their investments.

“One of the issues we face in bringing an end to this cycle of repression and discrimination is fully educating the public on the situation,” Ohio Representative Steve Chabot told BuzzFeed News.

Representative Tom Suozzi, who is co-sponsoring the House version of the Senate bill, said more needs to be known about who is invested in the technology used for surveillance in Xinjiang and how to leverage those investments to stop abusive practices.

SenseTime denies that it has any business in Xinjiang, and Megvii declined to comment on its activity in the province, but stressed that it requires clients to use its products legally and without infringing human rights.

Meanwhile, legislation is only one possible threat to investment in Megvii and SenseTime.

“We will continue to urge companies that do business in China to undertake human rights due diligence in line with the UN Guiding Principles on Business and Human Rights and implement safeguards to mitigate the risk that commercial activities are contributing to China’s human rights violations or abuses,” a State Department spokesperson said.