The Next Escalation In The U.S. Trade War Looks To 5 More Chinese Technology Companies

The Trump administration is considering applying Huawei-level sanctions to five more Chinese technology companies in the video surveillance sector including Megvii, Zhejiang Dahua Technology, Hangzhou Hikvision Digital Technology, Meiya Pico and Iflytek. The sanctions would bar the companies from buying U.S. software or hardware components.

According to the Trump administration, the companies have played a role in Beijing’s efforts to clamp down on minority Uighurs in western China. They are also global leaders in video surveillance, including facial recognition software that raises fears of espionage.

From the Chinese end a ban on U.S. technology sales to these companies is likely to look very different. These are companies that are among China’s global technology leaders and sanctions on them will be seen in China as yet another sign that the United States wants to use the current trade war to prevent the rise of Chinese economic power.

These names aren’t exactly familiar to U.S. investors but China’s video surveillance companies are the world’s largest sellers of surveillance hardware.  The companies have leveraged their global market presence on China’s huge domestic video surveillance sector. About 176 million video surveillance cameras were deployed in Chinese streets, buildings, and public spaces in 2016. That compares to 50 million surveillance cameras deployed in the United States in 2016, according to IHS Markit.

In the sector Hikvision is the industry leader in a global market that was worth $32 billion in 2017 and that is forecast, according to BIS Research, to grow by 16% a year through 2023. Hikvision and Dahua are members of the MSCI Asia Pacific Index and they are among the Shenzhen market stocks most owned by overseas investors.