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American investors will be barred from taking stakes in groups accused of involvement in Xinjiang abuses

As originally appeared in Financial Times.

The Biden administration will place eight Chinese companies including DJI, the world’s largest commercial drone manufacturer, on an investment blacklist for their alleged involvement in the surveillance of the Uyghur Muslim minority.

The US Treasury will put DJI and the other groups on its “Chinese military-industrial complex companies” blacklist on Thursday, according to two people briefed on the move. US investors are barred from taking financial stakes in the 60 Chinese groups already on the blacklist.

The measure marks the latest effort by US president Joe Biden to punish China for its repression of Uyghurs and other Muslim ethnic minorities in the north-western Xinjiang region.

This week, SenseTime, the facial recognition software company, postponed its planned initial public offering in Hong Kong after the Financial Times reported that the US was set to place the company on the blacklist.

The other Chinese companies that will be blacklisted on Thursday include Megvii, SenseTime’s main rival that last year halted plans to list in Hong Kong after it was put on a separate US blacklist, and Dawning Information Industry, a supercomputer manufacturer that operates cloud computing services in Xinjiang.

Also to be added are CloudWalk Technology, a facial recognition software company, Xiamen Meiya Pico, a cyber security group that works with law enforcement, Yitu Technology, an artificial intelligence company, Leon Technology, a cloud computing company, and NetPosa Technologies, a producer of cloud-based surveillance systems.

DJI and Megvii are not publicly traded, but Dawning Information, which is also knownas Sugon, is listed in Shanghai, and Leon, NetPosa and Meiya Pico trade in Shenzhen.

All eight companies are already on the commerce department’s “entity list”, which restricts US companies from exporting technology or products from America to the Chinese groups without obtaining a government licence.

The White House did not comment and the Treasury did not respond to a request for comment.

DJI declined to comment. But last year, it said it had “done nothing to justify being placed on the entity list” after it was added to the commerce department’s export blacklist at the end of former president Donald Trump’s term.

Zhao Lijian, foreign ministry spokesman, said: “China has always opposed the US’s generalisation of national security concepts and unreasonable suppression of Chinese companies.” He added that Beijing had presented the “facts and truth” of Xinjiang-related issues. “China will . . . resolutely defend the legitimate rights and interests of Chinese companies,” Zhao said.

The commerce department is also expected to place more than two dozen Chinese companies on the entity list on Thursday, including some involved in biotechnology, according to the people familiar with the pending action. The commerce department did not respond to a request for comment.

The sanctions action comes as the US has maintained a tough stance over China’s policies in Xinjiang, where more than 1m Uyghurs and other minorities have been held in detention camps. The White House last week announced a diplomatic boycott of the 2022 Winter Olympics in Beijing.

The Biden administration on Thursday will also consider tightening rules on US companies selling technology to Semiconductor Manufacturing International Corp, the largest Chinese chip manufacturer. The Trump administration put SMIC on the entity list a year ago, but the decision included a provision that critics said created a loophole that some companies had exploited.

Eric Sayers, head of the Indo-Pacific practice at consultancy Beacon Global Strategies, said Biden was moving into the implementation phase after reviewing many of his predecessor’s technology policies.

“It will be interesting to watch if these targeted but significant steps are just the beginning of a more aggressive approach being driven by the White House or the minimum the inter-agency can muster for now,” said Sayers. “If it’s the former, we could see further restrictions on SMIC and new outbound investment restrictions in the months ahead.”

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