US expands blacklist to include China’s top AI startups ahead of trade talks

The US accused Chinese tech companies of being involved in a ‘campaign of repression and mass arbitrary detention.’ (Reuters)
Updated 08 October 2019

US expands blacklist to include China’s top AI startups ahead of trade talks

  • Hikvision, top startups SenseTime and Megvii included on list
  • List covers 8 Chinese companies and 20 public security bureaus

WASHINGTON/SHANGHAI: The US government widened its trade blacklist to include some of China’s top artificial intelligence startups, punishing Beijing for its treatment of Muslim minorities and ratcheting up tensions ahead of high-level trade talks in Washington this week.
The decision, which drew a sharp rebuke from Beijing, targets 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group Ltd. and Megvii Technology Ltd.
The action bars the firms from buying components from US companies without US government approval — a potentially crippling move for some of them. It follows the same blueprint used by Washington in its attempt to limit the influence of Huawei Technologies Co. Ltd. for what it says are national security reasons.
US officials said the action was not tied to this week’s resumption of trade talks with China, but it signals no let-up in US President Donald Trump’s hard-line stance as the world’s two biggest economies seek to end their 15-month trade war.
The Commerce Department said in a filing the “entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.”
“The US Government and Department of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities within China,” said Secretary of Commerce Wilbur Ross.
China said the United States should stop interfering in its affairs. It will continue to take firm and resolute measures to protect its sovereign security, foreign ministry spokesman Geng Shuang told a regular media briefing without elaborating.
Hikvision, with a market value of about $42 billion, calls itself the world’s largest maker of video surveillance gear.
SenseTime, valued at around $4.5 billion in a May 2018 fundraising, is one of the world’s most valuable AI unicorns while Megvii, backed by e-commerce giant Alibaba, is valued at around $4 billion and is preparing an IPO to raise at least $500 million in Hong Kong.
The other companies on the list are speech recognition firm iFlytek Co, surveillance equipment maker Zhejiang Dahua Technology, data recovery firm Xiamen Meiya Pico Information Co, facial recognition firm Yitu Technology and Yixin Science and Technology Co.
A US Hikvision spokesman said the company “strongly opposes” the decision and noted that in January it retained a human rights expert and former US ambassador to advise the company on human rights compliance.
“Punishing Hikvision, despite these engagements, will deter global companies from communicating with the US government, hurt Hikvision’s US businesses partners and negatively impact the US economy,” the company added.
Hikvision also said that it was assessing the potential impact of the blacklisting and was working on contingency plans.
John Honovich, founder of surveillance video research company IPVM, said Hikvision and Dahua both use Intel Corp. , Nvidia Corp, Ambarella Inc, Western Digital and Seagate Technology as suppliers and that the impact on the Chinese companies would be “devastating.”
The blacklisting of Huawei has hurt many of its US suppliers that depended on the world’s largest telecommunications company for revenue and made it difficult for Huawei to sell new products.
Reuters reported in August Hikvision receives nearly 30% of its 50 billion yuan ($7 billion) in revenue from overseas.
SenseTime said in a statement it was deeply disappointed by the US move, that it abides by all relevant laws of the jurisdictions in which its operates and that it has been actively developing an AI code of ethics to ensure its technologies are used responsibly.
Megvii said it strongly objected to being placed on the blacklist and that it required its clients not to weaponize its technology or use it for illegal purposes.
IFlytek said its placement on the blacklist would not affect its daily operations, while Xiamen Meiya said its overseas revenue was less than 1% of total revenue and that most of its suppliers were domestic companies.
IFlytek fell 2.7% and Xiamen Meiya lost 1.8% on Tuesday as investors factored in their limited exposure to overseas markets and the potential for the US action to speed up restructuring, analysts said.
“China’s stock market has become increasingly immune to bad news from the trade war. No more panic selling,” said Stephen Huang, vice president of Shanghai See Truth Investment Management.
Hikvision and Dahua were suspended from trade at the companies’ behest. US supplier Ambarella fell 12% in after-hours trading.
In August, the Trump administration also released an interim rule banning federal purchases of telecommunications equipment from five Chinese companies, including Huawei and Hikvision.
Huawei has repeatedly denied it is controlled by the Chinese government, military or intelligence services and has filed a lawsuit against the US government’s restrictions.

Founder of troubled Metro Bank steps down early as chairman

Updated 23 October 2019

Founder of troubled Metro Bank steps down early as chairman

  • Board member Michael Snyder will be interim chairman until a permanent successor is appointed
  • US entrepreneur Hill, who launched Metro Bank almost a decade ago, has agreed to accept the honorary position of emeritus chairman

LONDON: Vernon Hill, the founder of Metro Bank, has stepped down as chairman two months early, as the British lender continues its battle to recover from an accounting scandal.

US entrepreneur Hill, who launched Metro Bank almost a decade ago, has agreed to accept the honorary position of emeritus chairman and will remain a non-executive director of the bank until Dec. 31, the bank said on Wednesday.

Board member Michael Snyder will be interim chairman until a permanent successor is appointed, subject to regulatory approval.

News of Hill’s exit follows a near-catastrophic year for Metro after it disclosed a major accounting error that had under-reported its exposure to higher-risk loans by almost 1 billion pounds ($1.3 billion).

The bank, famed for its glossy branch network and unconventional customer perks including pet treats and weekend opening hours, was later forced to raise capital at expensive rates to plug the gap in its balance sheet.

It is due to report third quarter results later on Wednesday.

British regulators have yet to take any action against Metro or its management team for the January accounting error but the lender has warned that possible penalties could be substantial and could lead to criminal investigations.

Metro had said in July that Hill, who regularly referred to the bank’s customers as ‘fans’, would step down from his role after a permanent replacement had been found.

The bank did not say why that plan had changed, but a spokeswoman said the decision was entirely Hill’s and was not linked to the ongoing regulatory probes.

“The Board thanks Vernon for his vision which inspired and created Metro Bank ten years ago. He leaves a lasting legacy of creating fans through exceptional customer service and has revolutionized British banking,” Snyder said in a statement.

While customers warmed to his publicity shots starring pet dog Duffy, Hill endured a fractious relationship with some investors, both before and after the accounting error.

Metro originally claimed it had discovered the mistake before later admitting the Prudential Regulation Authority had uncovered the error first, leading to a crisis of confidence over the quality of the bank’s corporate governance.

Some investors also raised concerns about Hill’s lack of independence and questioned payments made to his wife’s architecture firm, which Metro later said would be phased out.

But he survived two threatened rebellions over his chairmanship and the bank’s shares, which have shed almost 90 percent this year, were broadly flat in response to the news.