Goldman Evaluates Role in Chinese Megvii IPO Following U.S. Blacklist

Goldman Evaluates Role in Chinese Megvii IPO Following U.S. Blacklist

US multinational Goldman Sachs Group is reevaluating its role in Chinese artificial intelligence (AI) company Megvii Technology's initial public offering (IPO) plan after the USA administration placed it on an export blacklist, Reuters reported Wednesday.

In its announcement of the blacklist, the US government said the 28 entities had 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 the region.

In an emailed statement, Goldman said it is "evaluating in light of the recent developments".

SenseTime, which says it is valued at more than $7.5 billion, is one of the world's most valuable AI unicorns while Megvii, backed by e-commerce giant Alibaba, is valued at around $4 billion and is preparing an IPO to raise at least $500 million in Hong Kong.

Goldman, Citigroup Inc and JPMorgan Chase & Co are joint sponsors of the IPO.

Megvii refused to comment on Goldman's assertion.

The decision, which drew a sharp rebuke from Beijing, targets 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group and Megvii Technology. The US Department of Commerce cited the company's alleged role in facilitating human rights abuses in China's Xinjiang region.

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Megvii said it strongly objected to being placed on the blacklist and that it required its clients not to weaponize its technology or use it for illegal purposes. The U.S. has also restricted entry to the country for individuals associated with the Chinese government and Communist party and with the abuse measures in the XUA region.

Although the United Nations claims some 1 million people were mistreated in the region and detained in camps, Beijing denies all allegations. They have been buoyed by China's plans to build a ubiquitous CCTV surveillance network.

The expansion of the blacklist is a blow to some of China's hottest tech startups, especially in artificial intelligence. SenseTime was the first company to be announced by MIT previous year as part of its Intelligence Quest initiative.

Risk consultants say that investors and underwriters have jumped into the sector without fully assessing the dangers both to their reputations and to the valuations of the companies concerned.

In Hong Kong, sponsors shepherd companies through a listing and conduct due diligence and other functions.

"There will be a judgment call as to whether any USA investor would want to be associated with such businesses", said Rocky Lee, managing partner of the Silicon Valley office of law firm King & Wood Mallesons.

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