The American Money Behind Blacklisted Chinese AI Companies
The Shanghai office of a Chinese artificial intelligence company called SenseTime is home to an inky map of an imagined landscape. Painted by a prominent contemporary artist named Qiu Zhijie, Map of Artificial Intelligence traces milestones of AI’s development in a geographical allegory. AI is SenseTime’s golden goose—and also why the U.S. blacklisted it, along with seven other Chinese tech enterprises, in October 2019.
SenseTime and the seven other firms were added to the U.S. Commerce Department’s Entity List for being part of “China’s campaign of repression, mass arbitrary detention, and high-technology surveillance.” But that has not steered American money away from these companies, which have been snapping up contracts offered by the Chinese government to track and identify its own citizens in invasive manners.
AI-powered surveillance in China has come a long way. It was only a few years ago when state media regularly aired reports showing rooms full of police officers, each hunched over a screen, watching footage recorded by security cameras to track suspects from pickpockets, to white-collar criminals, to meth kingpins.
Amazon Partner in China Is Making Facial-Recognition Tech to Track Uighurs
Last year, at least 200 million CCTV cameras formed the Skynet state surveillance system—“the eyes that safeguard the nation,” as state media calls it. Whereas identifying and tracking an individual once took many hours of collective human labor and tight coordination, all of that is now automated, with software processing footage in real time. Depending on directives issued by state security officials, Skynet can also single out people who are not criminals, but are instead dissidents, activists, or members of minority groups like the Xinjiang region’s Uighurs.
American investors have been eager to cut huge checks to Chinese AI companies, betting on massive payoffs that include contracts doled by the Chinese Communist Party.
SenseTime counts Qualcomm’s investment arm; Boston-based IDG Capital; Menlo Park’s Silver Lake; New York-based Tiger Global; and Fidelity International, the sibling firm of Boston’s Fidelity Investments, as investors of U.S. origin. Since 2014, SenseTime has bagged more than $2.6 billion from these investors as well as others from mainland China, Hong Kong, Japan, and Singapore, according to business intelligence provider CB Insights. These funds are used to build AI tools of many variations, including those of a Big Brother bent.
The Daily Beast reached out to the five firms for a comment. Only one responded.
Mariko Sanchanta, Fidelity International’s Asia Pacific head of corporate communications, said her employer is “a completely separate entity from Fidelity Investments” and that “we are not a U.S.-based firm.”
Abigail Johnson, one of the richest women in the world and the granddaughter of Fidelity Investments founder Edward Johnson II, is the chairman of Fidelity International. She is also the chairman and CEO of Fidelity Investments.
The websites of Qualcomm Ventures, IDG Capital, and Silver Lake show SenseTime as part of each firm’s portfolio.
One of the brains behind SenseTime is co-founder Xu Li. Like many techies, Xu has a penchant for science fiction. Soft-spoken and with an astute charm, he cites Liu Cixin’s Hugo Award-winning novel The Three-Body Problem as a favorite. In the story, members of an alien race, the Trisolarans, communicate their thoughts unfiltered, meaning they are unable to lie or obscure their intentions. Xu likens this to artificial intelligence as we know it—software cannot misrepresent facts, his logic goes, and it will not conceal information that users ask for.
But his company, SenseTime, operates in shady ways, supplying the Chinese government with tech for systems that abuse human rights, the U.S. Commerce Department has stated.
With cash from the U.S. pouring into SenseTime and companies like it, there is one question that needs to be answered: Why blacklist Chinese tech firms at all, if American capital flows into and remains with them anyway?
U.S. businesses require a special license to do business with Chinese firms that are on the Commerce Department’s Entity List. When those licenses are issued, the Trump administration’s sanctions have little effect on Chinese companies that are, on paper, “banned.”
Protests of the Future Will Have More Anger, More AI, More Helplessness
In November, for instance, Qualcomm received permission to sell chips to Huawei, which is also on the Entity List for its role in human-rights abuses in Xinjiang. Huawei partners with firms like SenseTime to develop systems that surveil Uighurs, The Washington Post reported this month.
While facial recognition has heavy government backing in China and is becoming more common in some parts of the country, the creeping (and creepy) prevalence of this form of tech draws criticism from a concerned public.
There are legitimate uses: police in Beijing, Shenzhen, and several other cities use these surveillance tools at crosswalks to fine jaywalkers. But its deployment at subway turnstiles, at school entrances, in classrooms, in parks, by businesses to tag and track clients, and even in public toilets has led people to question why they and their families are tracked constantly, and where this data goes. The lack of privacy protection laws and fear of identity theft are chief concerns.
While some local governments in China have tightened rules on private businesses collecting facial data in public domains, the implementation of facial recognition for purported state security purposes is ramping up. In 2017, there were 176 million cameras with this tech built in, installed across the country. Now, that count is roughly 626 million.
The coronavirus pandemic has only hastened the Chinese state’s adoption of facial recognition. When outbreaks flared up in parts of China, officials quickly installed sensors to monitor whether people were wearing masks in public, read their body temperature, and identify rulebreakers. In August, SenseTime projected its 2020 revenue would hit $1.3 billion, up 80 percent from last year.
China’s security apparatus can be a lucrative source of income. Another firm, Cloudwalk, used to supply banks with AI tools. After rejigging its algorithms for China’s law enforcement, Cloudwalk’s platform led to 10,000 arrests, South China Morning Post reported last year. This month, the firm filed for a $573 million IPO in Shanghai.
For American investors who have poured money into tech companies that serve at the Chinese Communist Party’s pleasure, it isn’t business as usual despite sanctions. Business, in fact, is booming.
Get our top stories in your inbox every day. Sign up now!
Daily Beast Membership: Beast Inside goes deeper on the stories that matter to you. Learn more.
