The Treasury Department on Thursday blacklisted eight Chinese companies, including global drone market leader DJI Technology, as part of a campaign to punish what U.S. officials say is corporate support for Beijing’s illicit surveillance of minority Uyghurs and other Chinese ethnic and religious groups.
The Office of Foreign Assets Control said the eight firms were linked to biometric surveillance and tracking in China. That includes western Xinjiang province, where the State Department in January declared genocide against the local Muslim Uyghur population. The technology companies were sanctioned under a June presidential order designed to prevent American securities from financing the Chinese military.
The sanctions prohibit U.S. companies from buying or selling specific publicly traded securities linked to the companies.
“Today’s action highlights how private firms in China’s defense and surveillance technology sectors are actively cooperating with the government’s efforts to repress members of ethnic and religious minority groups,” said Brian E. Nelson, Treasury undersecretary for terrorism and financial intelligence. “Treasury remains committed to ensuring that the U.S. financial system and American investors are not supporting these activities.”
The U.S.-Chinese economic clash heated up on another front Thursday as the Senate gave final approval to a bipartisan bill to crack down on imports from Xinjiang, where the U.S. and private rights groups accuse state-supported businesses of using forced Uyghur labor. The bill now goes to President Biden, who is expected to sign it.
Sen. Marco Rubio, Florida Republican and a lead sponsor of the measure, said many American companies have already moved away from working with Xinjiang suppliers.
“For those who have not done that,” he said, “they’ll no longer be able to continue to make Americans — every one of us, frankly — unwitting accomplices in the atrocities, in the genocide that’s being committed by the Chinese Communist Party.”
The vote capped a long legislative journey for the Uyghur Forced Labor Prevention Act, which authorizes sanctions against companies that facilitate the forced labor of Muslim minority groups, including Uyghurs, in Xinjiang. It also prohibits imports from the region unless U.S. Customs and Border Protection determines that no forced labor was used in production.
The ban threatens to shake up global trade patterns for products such as apparel and electronics. The Xinjiang region is also a key global exporter of electronics and agricultural goods, including cotton and tomatoes.
It could also pose a particular challenge to U.S.-based solar panel manufacturers. Close to half of the world’s supply of polysilicon, a key input to solar cells, is manufactured in Xinjiang, according to a report by the Center for Strategic and International Studies.
The most prominent firm on the Treasury list is SZ DJI Technology Co. Ltd., the dominant player among the world’s commercial drone manufacturers with an estimated 70% of the global market. The company also provides drones for Chinese police in Xinjiang to use against Uyghur suspects. The police agency there was sanctioned in July 2020 for human rights abuses.
A DJI spokesman had no comment on the Treasury action but noted a response last year to similar action by the Commerce Department.
“DJI has done nothing to justify being placed on the Entities List,” the earlier statement said. “We have always focused on building products that save lives and benefit society. … We are evaluating options to ensure our customers, partners, and suppliers are treated fairly.”
Leon Technology, also on the blacklist, published a statement this week saying its business does not involve U.S. markets. The company said the investment blacklist would not significantly impact operations, products and services, or the bottom line. Leon stock surged as much as 15% after the company released the statement.
Supporters of the communist regime say U.S. sanctions under Presidents Trump and Biden have failed to prevent China’s rise as a technological superpower and that the effort will only end up hurting U.S. companies that rely on Chinese goods.
“Since the U.S. cannot afford to decouple with China in trade ties, it will do everything to suppress Chinese companies in the field of science and technology,” Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, told the state-controlled Global Times on Thursday.
According to the Treasury notice, the Chinese Communist Party secretary in Xinjiang, Chen Quanguo, increased repressive surveillance of Uyghurs in the region.
“Such actions included the installation of thousands of neighborhood police kiosks and ubiquitous placement of surveillance cameras, collection of biometric data for identification purposes, and more intrusive monitoring of internet use,” the notice stated.
One million to 1.8 million Uyghurs and others in ethnic and religious minority groups, including Kazakhs, were forced into “reeducation” centers that critics call concentration camps.
Mr. Chen was sanctioned in 2020 under the Global Magnitsky Human Rights Accountability Act for his role in major human rights abuses.
The sanctioning of DJI is a strike against the drone maker, whose equipment was purchased by the Biden administration despite internal government warnings against the company. A spokesman for DJI did not immediately respond to a request for comment.
The crackdown marks a different approach for the Biden administration.
Government procurement records show that the Secret Service purchased eight commercial surveillance drones made by DJI this year despite a Defense Department warning in July that the deal posed “potential threats to national security.” The FBI sought DJI drones at about the same time that the Secret Service made its purchases.
The Secret Service and FBI bypassed the Pentagon warning and Trump administration blacklisting. Last December, the Trump administration added DJI to the Commerce Department’s Entity List, which places restrictions on certain foreign people and companies and blocks Americans from investing in foreign enterprises that may present national security problems. The Biden administration announced Thursday that it was adding a few scores more Chinese academies, companies and others to the Commerce Department’s blacklist.
Public pressure has mounted on the Biden administration to explain its actions. Rep. Jim Banks, Indiana Republican, wrote to Attorney General Merrick Garland with questions about the Secret Service and FBI. The Washington Free Beacon reported that the lawmaker had pushed for a ban on purchases of DJI drones.
The other companies sanctioned by the Treasury are Cloudwalk Technology Co. Ltd.; Dawning Information Industry Co. Ltd.; Leon Technology Co. Ltd.; Megvii Technology Ltd.; Netposa Technologies Ltd.; Xiamen Meiya Pico Information Co. Ltd.; and Yitu Ltd.
Cloudwalk and Yitu developed facial recognition that technology critics say is being used for repression in China. The Zimbabwean government also is using Cloudwalk’s tools for mass surveillance activity.
The eight firms are also on the Commerce Department’s Entities List, which requires export licenses for interactions with U.S. firms.