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China signals it will hit back over U.S. tech blacklist

(Bloomberg) --China signaled it would hit back after the Trump administration placed eight of the country’s technology giants on a blacklist over alleged human rights violations against Muslim minorities.

Asked on Tuesday if China would retaliate over the blacklist, foreign ministry spokesman Geng Shuang told reporters “stay tuned.” He also denied that the government abused human rights in the far west region of Xinjiang.

“We urge the U.S. side to immediately correct its mistake, withdraw the relevant decision and stop interfering in China’s internal affairs,” Geng said. “China will continue to take firm and forceful measures to resolutely safeguard national sovereignty, security and development interests.”

The move, which was announced after U.S. markets closed, came on the same day negotiators from the U.S. and China began working-level preparations for high-level talks due to begin Thursday in Washington. A Commerce Department spokesman said the “action is unrelated to the trade negotiations,” and China confirmed Liu He would lead the delegation as planned. Markets focused on the resumption of discussions as a reason to buy stocks.

The blacklist, first reported by Reuters, still takes President Donald Trump’s economic war against China in a new direction, marking the first time his administration has cited human rights as a reason for action. Past moves to blacklist companies such as Huawei Technologies Co. have been taken on national security grounds.

The companies on the blacklist include two video surveillance companies -- Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. -- that by some accounts control as much as a third of the global market for video surveillance and have cameras all over the world.

Also targeted were SenseTime Group Ltd. -- the world’s most valuable artificial intelligence startup -- and fellow AI giant Megvii Technology Ltd., which is said to be aiming to raise up to $1 billion in a Hong Kong initial public offering. Backed by Chinese e-commerce giant Alibaba Group Holding Ltd., the pair are at the forefront of China’s ambition to dominate AI in coming years.

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Entities on the list are prohibited from doing business with American companies without being granted a U.S. government license, though some have maintained relationships with banned companies through international subsidiaries. Hikvision and Dahua were suspended from trading Tuesday but iFlytek Co., one of the eight singled out, slid as much as 3.1% in Shenzhen.

Also included are Xiamen Meiya Pico Information Co. Ltd, which bills itself as an “expert in digital forensics and cybersecurity in China,” according to its website, and Shanghai-based Yixin Science and Technology, a supplier of micro and nano fabrication equipment.

“Specifically, these entities have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups” in Xinjiang, the U.S. Commerce Department said in a federal register notice published Monday.

The foreign ministry’s Geng accused the U.S. having “sinister intentions.”

“The so-called human rights issue of the U.S. does not exist in Xinjiang,” he said. “The measures taken by China to eliminate extremism from the roots are fully in line with Chinese law and international practice.”

SenseTime and Dahua weren’t immediately available for comment outside of normal business hours.

“Hikvision strongly opposes today’s decision by the U.S. government and it will hamper efforts by global companies to improve human rights around the world,” the company said in a statement. “Punishing Hikvision, despite these engagements, will deter global companies from communicating with the U.S. government, hurt Hikvision’s U.S. businesses partners and negatively impact the U.S. economy.”

Megvii said the U.S. had “no grounds” to put it on the list, and noted that Human Rights Watch had corrected a report that implicated the company. It added that it hadn’t earned revenue from Xinjiang in the first part of the year, and the impact on its business from the designation was minimal.

“We believe our inclusion on the list reflects a misunderstanding of our company and our technology, and we will be engaging with the U.S. government on this basis,” Megvii said.

The blacklist comes as Trump faces growing pressure at home to support pro-democracy protests in the Chinese-controlled territory of Hong Kong. On Monday, Trump said he was hoping for a “humane solution” in a city where protests have grown increasingly violent.

“They even have signs, ‘Make China Great Again,’ ‘Make Hong Kong Great Again,’” he told reporters. “They have tremendous signage.”

None of the other companies had immediate comment.