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Megvii, CloudWalk, Yitu to join SenseTime on US investment blacklist

U.S. investors are to be barred from investing in eight more Chinese firms alleged to be involved in abuses in Xinjiang. The firms include facial recognition and AI firms CloudWalk Technology, Yitu Technology and Megvii along with commercial drone manufacturer DJI, reports the Financial Times in its latest coverage of U.S. blacklisting.

There are already 60 firms on the “Chinese military-industrial complex companies” blacklist. Just one week ago, the U.S. announced it was placing facial recognition and surveillance specialist SenseTime on the investment blacklist, reported the Financial Times. That was timed to happen the day the firm would price its shares for its Hong Kong IPO. SenseTime has since postponed the launch.

The latest eight firms, which also include cybersecurity firm Xiamen Meiya Pico, cloud computing specialist Leon Technology, cloud-based surveillance tech firm NetPosa Technologies and Dawning Information Industry, a super-computer manufacturer allegedly operating cloud computing in Xinjiang, are all already on the Commerce Department’s “entity list” which bans them from exporting their goods or technology to the U.S. Last year DJI denied having done anything to warrant being put on the entity list.

The FT believes a further two dozen companies could be placed on the entity list Thursday.

The Human Rights Watch (HRW) reports that 43 UN member states have recently condemned the abuses against Uyghers in the Xinjiang region and called for the UN High Commissioner for Human Rights to produce a report on the issue as soon as possible. In an update, HRW quotes the United Nations Office of the High Commissioner for Human Rights stating it expects to bring such a report “in the matter of a few weeks.” China denies the allegations although in the face of satellite imagery and media investigations has acknowledged the building of certain sites and infrastructure.

An independent investigation in the UK called the Uyghur Tribunal recently uncovered the scale of ethnic recognition systems across China.

Market situation tightens for China’s loss-making biometric unicorns

A report by Chinese outlet Caixin (whose days could be numbered) found that SenseTime, Megvii, Yitu and CloudWalk – among the major players in the facial recognition surveillance technology sector – are all already struggling to meet market expectations.

Caixin analyzed their prospectuses and found that the four spend on average 1.85RMB to bring in 1RMB and are highly reliant on government contracts at home and abroad. Bans on using their technology in markets such as the U.S., barriers around holding IPOs there and now a U.S. investment ban are all reducing funding opportunities for the firms.

Heavier regulation from Beijing could be making some practices more difficult for the firms, but they hope to start making large cost savings in labor.

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