Sunday, 13 October 2019

BOYCOTT THE HAN CHINESE DOGS! KILL THEM ALL! NOW!

China blacklists and the great investor unwinding

The Lex Column
Troubled by human rights abuses in China, US universities have been unwinding partnerships with Chinese colleges.
Evidence of indirect financial links with “re-education” camps — jails where 1 million of Xinjiang’s Muslims are incarcerated — would cause greater embarrassment. That jeopardy has been created by a US blacklist of Chinese artificial intelligence companies implicated in state repression.
Wall Street has well-publicised connections with companies such as Megvii. Goldman Sachs is reportedly reviewing its involvement in the proposed flotation of the blacklisted facial recognition group. Megvii is one of eight businesses allegedly providing technology to detention camps, where members of China’s repressed Uighur minority are held.
There has been little mention so far of US funds whose money helped the companies grow. Disinvestment could hurt these businesses far more than a shortage of US components resulting from the blacklist.
That list includes AI companies SenseTime and iFlytek. Surveillance companies Hikvision and Dahua are there too. Nvidia, Intel and Qualcomm are among many global partners they source parts from.
But components for surveillance equipment and servers are relatively low tech. They can easily be sourced elsewhere. A US exports ban does not hit Chinese groups half as badly as the one placed on telecoms equipment company Huawei.
The financial implications of blacklisting are far harder to shrug off. Chinese claims that its camps are for vocational training are hard to believe. Megvii may struggle to raise the $US1 billion ($1.5 billion) it expected from a Hong Kong flotation if sponsors Goldman, Citigroup and JPMorgan Chase were to pull out.
US investors have been piling into fast-growing Chinese AI companies such as Megvii and SenseTime. Their backers have included Fidelity, Silver Lake Partners, GGV Capital, IDG Capital, Qualcomm and Qiming Ventures, a Shanghai-based fund.
More than 17 US universities and public pension plans have put money into vehicles run by these institutions in the past. They have done so indirectly for the most part, as limited partners in private equity funds, according to historic PitchBook data.
Shares of Hikvision and iFlytek are down about a tenth in the past month. The value of blacklisted businesses will fall further if US investors pull out en masse.
US universities and pension plans are vociferous advocates of corporate ethics within the US. The blacklist forces them to review their Chinese holdings through the same demanding lens.
Financial Times

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