The Chinese artificial intelligence start-up SenseTime has been postponing a $767 million initial public offering in Hong Kong after it was blacklisted by the US over human rights concerns in Xinjiang.
The US Treasury announced on Friday that SenseTime's facial recognition programmes were designed to be used against Uyghurs and other mostly Muslim minorities in Xinjiang, where UN experts and researchers estimate more than one million have been incarcerated in prison camps.
The blacklisting immediately cast doubt on the company's IPO plans in Hong Kong, which had been due to take place a week later and illustrated the risks that investors face as relations between the world's two biggest economies have soured.
On Monday, SenseTime filed a statement with the Hong Kong stock exchange saying it would postpone its listing to protect the interests of potential investors as they weigh the impact of being placed on the blacklist.
SenseTime said it would refund those who had already invested in Hong Kong and will be fully committed to listing in Hong Kong.
The US sanction and blacklisting can prevent individuals from getting visas to the United States, block assets under US jurisdiction, and prevent them from doing business with US individuals or entities, effectively locking them out of the US banking system.
A blacklisting would make it impossible for US investment banks usually involved in Hong Kong listings to get involved, or for a US national to invest in the offering.
Washington says SenseTime is part of China's military-industrial complex. It had already placed the company on the US Department of Commerce's blacklist in 2019 because of its technology that has been used for mass surveillance in Xinjiang.
It says SenseTime has developed facial recognition software that can be used to determine a person's ethnicity, including whether someone looks Uyghur.
SenseTime strongly criticised the latest blacklisting, saying it was caught in the middle of geopolitical tension and strongly opposes the designation and accusations that have been made in connection with it. The firm said that the accusations are unfounded and reflect a fundamental misperception of our Company.
The plight of the Uyghurs has contributed to worsening relations between western powers and Beijing.
Human rights groups and foreign governments have found evidence of mass detentions, forced labour, political indoctrination, torture and forced sterilization. Washington has described it as a genocide.
After initially denying the existence of the Xinjiang camps, China defended them as vocational training centres aimed at reducing the appeal of Islamic extremism.
The use of technology to keep track of its citizens, and the companies that pioneered such research, have come under increased international scrutiny in the past few years.
China has a large number of sophisticated surveillance programmes, both online and on the streets, with artificial intelligence and facial recognition software playing key roles.
SenseTime was used to check commuter temperatures, determine if they were wearing a facemask and identify people when their mouths were covered during the coronavirus epidemic.
The company, founded in 2014 by academic Tang Xiao'ou at the Chinese University of Hong Kong, has become one of China's most valuable start-ups in just a few years.