For China’s Hikvision, the world’s biggest video surveillance system provider, and a seller to Xinjiang police departments, there may be a time for reckoning.
Hikvision has not been permitted to sell to U.S. federal government agencies since August 13, thanks to a law adopted last year that blocked five Chinese companies as security threats as possible because their products could allow access to sensitive systems.
This has compelled the firm – which draws approximately 30% of its 50 billion yuan ($7.12 billion) of foreign income – into a tightrope: it must assist security and human rights issues in the West without angering the Chinese government, a major client, and an all-powerful regulator.
The firm, known as Hangzhou Hikvision Digital Technology Co Ltd, attempts to distance itself openly from Xinjiang as it lobbies to alleviate U.S. constraints.
Hikvision signed public-private partnership agreements worth 1.9 billion yuan – worth an average of 370 million yuan each – between 2016 and 2017 with Xinjiang police, the acquisition papers indicate.
Although the deals with Xinjiang have decreased since the U.S. Congress passed the ban last year, earlier unreported government procurement papers reviewed by reporters indicate that Hikvision surveillance equipment was named in over 110 million yuan of Chinese police, army and court contracts there.
The United Nations claims there are reliable estimates that approximately one million individuals have been arrested in Xinjiang without formal charges, mostly from the Muslim Uighur minority.
A representative from Hikvision said the firm “takes global human rights very seriously” and pointed out that their technology was also used in stores, traffic control and commercial buildings.
“We don’t know where and how our products being sold or being used,” the representative said of Xinjiang. “But all our business is required to align with the company’s compliance policy.”
Hikvision refused to tell what his policy of compliance was, but said it was in line with local legislation.
The Chinese Public Security Bureau and the Xinjiang Uighur Autonomous Region Public Security Bureau where the tendered projects are situated have not responded to demands for comments by fax.
Foreign investors who once entered the business, including UBS AG, have in the last five months dumped at least 300 million shares of their inventory, shareholder information shows, with some citing worries about their participation in China’s growing surveillance state in the Xinjiang region.
“Hikvision needs to decide whether it wants to be a global company or … just be a China-based business,” One former Hikvision top investor said he sold his stake on human rights issues. He spoke on anonymity condition as he was not allowed to talk to the press.
Hikvision’s key business is surveillance cameras, which in many areas of the globe have become omnipresent. It also sells much more elaborate integrated systems, often including technology for facial recognition, as well as supplying other safety suppliers with hardware.
The 2016-17 initiatives include mosque facial recognition and monitoring systems, the papers and Hikvision said. Human rights groups claim such state-of – the-art mass surveillance is at the core of a repressive campaign.
Documents also mentioned such “training center” schemes-the term used by the Chinese officials to define what external scientists say is internment camps. Hikvision verified its participation in the project.
Hikvision technology has been referenced in at least 27 state-issued tenders in the Uighur Autonomous Region of Xinjiang since the U.S. procurement ban in August 2018, including agreements to provide police, army and court surveillance facilities.
The procurement documents show that they were worth at least 110.5 million yuan collectively.
Many of the tenders are highly edited to remove specifics of the project, complete budgets, and itemized expenses. But a study of Hikvision technology worth 6 million yuan in the tenders indicates thousands of surveillance cameras from the company as well as data storage and transmission technology.
One initiative from the Department of Public Security of the Xinjiang Uighur Autonomous Region dated Sept. 28, 2018 calls for 50 camera units worth 425,000 yuan. Another project, monitoring upgrades for a 510,000 yuan Military Communist Party Committee in Urumqi, listed Hikvision as the “primary” provider of machinery in a tender dated April 10, 2018.
Since the start of 2018, the company’s technology has also been used in smaller agreements worth at least 180 million yuan, including business, army and police projects.
The Hikvision representative said the business does not always understand where third-party are selling its technology.
The Office of Public Security of China and the Office of Public Security of the Autonomous Region of Xinjiang Uighur did not react to demands for comment by fax.
Kevin Manning, a spokesperson for the Commerce Department, refused to comment on Hikvision and whether it would be added to the Entity List by the agency, citing a policy that the agency would not comment on prospective additions to the list.
Journalists revealed that the administration considered Huawei-like sanctions on Hikvision over the treatment of the Uighurs by China in May.
And concerns about China’s high-tech surveillance programs have prompted Hong Kong’s protester reaction, which utilizes Hikvision devices and other Chinese surveillance firms.
Hikvision has continued to develop despite the selloff from foreign investors. Revenues for the first quarter of 2019 increased to 23.9 billion yuan in the first quarter by 14.6 percent over the past years. 29% of sales came from foreign markets, compared to 30% a year earlier, and almost half of sales came from “front-end products” like cameras.
Chinese state investors and their two main founders own 42 percent of Hikvision.
As of 6 August, investors using the Shenzhen-Hong Kong Stock Connect, which enables global investors to trade the Chinese-listed inventory of Hikvision, held a total of 582 million shares in the business, down 34% from 879.5 million shares at the end of March, according to HKEX information.
Over the past year, its stock has dropped by 4.2 percent. The only direct institutional overseas investor of the business, UBS AG, which was the ninth largest shareholder of Hikvision in March 2019, has since fallen out of the top 10 shareholders of the company, company information showed.
UBS has refused to comment.
Hikvision has started lobbying in the U.S. in the midst of worries about how its monitoring tech is being used.
Hikvision’s U.S. subsidiary has paid about $1.63 million in charges since June 2018 for NDAA-related work, according to government filings, to two lobbying organisations, the Glover Park Group and Sidley Austin. None of the companies answered requests for comments.
The company’s efforts to redeem its image also include the publication in April of a 99-page environmental, social and governance report, which did not mention Xinjiang.
The report said the firm had hired U.S. law firm Arent Fox LLP to perform an inner evaluation to “better protect” human rights over the previous year.
The review, supervised by Pierre-Richard Prosper, a former U.S. partner at Arent Fox. War Crimes Issues Ambassador-at-Large included at least two journeys to China, the study said.
Hikvision verified that the trips included Xinjiang, but said the company had not yet produced a report of the results of the visits.
Arent Fox and Prosper have not responded to comments requests.