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Chinese surveillance technology group Hikvision has terminated five contracts with local governments in the north-western region of Xinjiang, a move that could help shield it from pressure from the incoming administration of US president-elect Donald Trump.
Trump’s first administration blacklisted Hikvision in 2019 over its alleged role in facilitating human rights abuses against Xinjiang’s mainly Muslim Uyghur ethnic group.
The surveillance camera producer said on Friday that the companies set up to handle the five contracts would no longer provide contracted maintenance on them.
By putting Hikvision on its “entity list” in 2019, Washington barred the group from acquiring US technology. The Biden administration last year added to the list five Hikvision subsidiaries responsible for the Xinjiang projects.
Hikvision did not say if it retained any business in Xinjiang or why it had terminated the five projects. In recent financial disclosures, it has cited “constrained” local government finances as an explanation for recent weak financial performance.
“Governments have been hit by one fiscal shock after another”, causing “some projects to shrink significantly”, a Hikvision executive said in a call with analysts in October.
Hikvision’s announcement comes as Chinese tech companies are trying to decide how to deal with the incoming Trump administration, amid mounting concern his hawkish selections for cabinet positions spell even tougher restrictions on them.
Chinese high tech companies are fearful Trump could put them on the Specially Designated Nationals and Blocked Persons List, which would mean suppliers, customers and banks would risk violating US sanctions by doing business with them.
Trump has tapped ardent Hikvision critic Marco Rubio as his incoming administration’s secretary of state.
Rubio has led the charge against Hikvision, security camera company Dahua Technology and SenseTime, a Chinese artificial intelligence business that specialises in facial recognition, saying they “pose national security dangers to the United States or are complicit in the Communist party’s build-up of its Orwellian surveillance state” in Xinjiang.
Hikvision’s exit from the projects could be politically sensitive in China, where international companies that have reduced their involvement in Xinjiang have suffered a nationalist backlash.
The Chinese government denies accusations of widespread human rights abuses in Xinjiang and in September threatened to put the US parent company of clothing brand Calvin Klein on a national security blacklist for allegedly boycotting cotton from the region.
Hikvision’s announcement also highlights the financial difficulties of Chinese local governments, many of which are experiencing fiscal shortfalls due to falling revenues from land sales at a time when they are still reeling from the cost of mass testing and quarantines imposed during the coronavirus pandemic.
Based on similar deals with local governments, the combined value of the five Xinjiang contracts is likely to be in the low hundreds of millions of dollars.
Hikvision guaranteed loans taken out by its five Xinjiang subsidiaries to finance the projects, potentially leaving the company saddled with large bad debts. However, the company said the contract terminations did not “materially impact our business operations and financial condition”.
Hikvision and SenseTime have been seeking to reduce their reliance on revenue from government contracts.
Hikvision has sought to sell automated manufacturing solutions to factories, while earlier this month SenseTime announced a restructuring to focus on generative AI as its “core business”.
SenseTime’s revenues from its “traditional AI” business, which includes selling surveillance equipment to local governments, fell over 50 per cent in the first half of the year to Rmb520mn ($71.5mn).
