U.S. Sanctions on Hikvision Would Dangerously Escalate China Tech Tensions

Washington is weighing whether to sanction Chinese tech company Hikvision for human rights violations under the Global Magnitsky Act, media outlets reported Wednesday. The U.S. government has rolled out numerous restrictions targeting China’s tech sector for several years now, making this story easy to overlook. But this time is different. Sanctions currently being considered for Hikvision would mark a profound escalation of U.S.-China tech tensions—a new turning point perhaps akin to the Donald Trump administration’s far-reaching campaign against Huawei. President Joe Biden should urgently reverse course.

Jon Bateman

Jon Bateman is a fellow in the Cyber Policy Initiative of the Technology and International Affairs Program at the Carnegie Endowment for International Peace.
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@JonKBateman

Hikvision is a large, publicly traded Chinese video surveillance equipment maker. It has a major global presence, with international sales to government agencies and private companies in more than 180 countries (including the United States). Like other high-profile Chinese tech companies, Hikvision has faced growing scrutiny in recent years. Key concerns in Washington and elsewhere include Hikvision’s poor cybersecurity and data security record; status as Chinese state–owned enterprise, subsidy recipient, and so-called national champion; work with the People’s Liberation Army; participation in Chinese mass surveillance; and sales to repressive regimes.

But the overriding policy issue has been Hikvision’s support for China’s horrific repression of its Uyghur population. The firm has provided cameras for detention centers, mosques, and schools in Xinjiang, where Beijing has carried out mass internments on an incredible scale and sought to suppress the Uyghurs’ distinctive culture, religion, and ethnicity. Hikvision even marketed facial recognition systems that claimed to distinguish ethnic Uyghurs from China’s majority Han. Given this deep and willful enmeshment in what has rightly been called a genocide, Hikvision arguably has the worst human rights record of any globally recognizable Chinese tech company.

These concerns have recently led the United States and other governments to place multiple restrictions on Hikvision. The firm is already on several lists that prevent Hikvision from importing U.S.-origin goods without a license; receiving American investment; or selling products to U.S. telecoms, federal agencies, or federal contractors. Moreover, Hikvision will be unable to sell any new products in the United States once the Federal Communications Commission finalizes pending regulations required by Congress.

Yet the current restrictions on Hikvision pale in comparison to what Washington is now considering. The Global Magnitsky Act empowers the Treasury Department to impose a range of powerful sanctions on foreign companies and individuals involved in human rights violations, to include placement on the Specially Designated Nationals (SDN) List—what many people mean by “sanctions.” It is the harshest financial penalty in Washington’s tool kit, often used against terrorists, drug lords, and the worst human rights abusers.

An SDN designation would vault Hikvision past Huawei to become the most-sanctioned Chinese tech company. It would grievously (perhaps fatally) wound the company, depending on how sanctions are implemented—specifically, what scope of transactions are blocked and whether any exemptions are offered. Hikvision’s fate would also depend on how China, and other countries and companies, choose to respond.

The most severe sanctions would freeze all of Hikvision’s assets and create civil and potential criminal penalties for anyone globally who sends Hikvision money or property, provided there is some nexus to U.S. legal jurisdiction (such as use of the dollar-denominated international financial system). In other words, U.S. sanctions could stop Hikvision from selling anything to or buying anything from all countries friendly with (or at least afraid of) the United States. The sanctions could block Hikvision from using reputable international banks. Hikvision’s online presence could be eliminated in much of the world if internet hosts and social media platforms take down its accounts. Many of Hikvision’s employees could technically face U.S. civil and criminal liability for their involvement with a designated entity. And Hikvision would suffer incalculable reputational damage. It would also find that many parties choose to over-comply with sanctions—doing more than U.S. law requires to avoid any scintilla of risk.

Sanctioning Hikvision in these ways would break new ground. Despite years of restrictive measures against the Chinese tech sector, Washington has used the SDN List very sparingly. The most prominent such designation was of the state-owned firm CEIEC for helping Venezuelan President Nicolás Maduro repress dissent in his country. No global Chinese tech brands are on the SDN List, and few Chinese actors of any kind are listed—only 332 individuals and organizations, about 3 percent of the SDN List’s global total, as of March. Of this small Chinese subset, the vast majority were similar to CEIEC: they were sanctioned for dealings with other sanctioned countries, not for supporting Beijing’s behavior.

This dearth of precedents makes it hard to accurately predict how Hikvision might weather a designation. Few large, global companies—the kind of firms treated as normal by most of the world—have been placed on the SDN List. The closest parallel may be recent designations of Russian companies such as Sberbank and Alfa Bank. These companies claim to have successfully adapted, perhaps due to Moscow’s support and their limited or manageable exposure to the U.S.-aligned world.

It’s impossible to imagine that the Chinese government would comply with these sanctions, facilitating the humiliation and potential destruction of one of its own national champions. Yet defiance would come with its own unknown legal, diplomatic, and economic consequences. In the past, Beijing has been somewhat cautious in response to U.S. technology restrictions—taking superficially reciprocal actions that may not pack quite the same punch. For example, Washington’s growing use of its Entity List to target Chinese firms led Beijing to create its own Unreliable Entity List in 2020, yet no public designations have been made under this new authority. China’s ongoing economic malaise, and self-inflicted wounds in its own tech industry, could weigh on the side of restraint.

But Hikvision’s provocative placement on the SDN List would likely force Chinese leaders to show strength to their own citizens and to the world. Beijing might respond in any number of ways—perhaps by freezing the Chinese assets of a large U.S. company, halting bilateral talks on stock market rules, or further closing ranks with Russia as the war in Ukraine rages.

Washington should also be aware that a powerful Chinese counterpunch could trigger tit-for-tat dynamics and escalatory spirals. If Beijing reacts by placing U.S. firms on its Unreliable Entity List, for example, then American political figures would doubtless demand further punishment of China.

At the same time, the U.S. precedent set by a Hikvision designation would create domestic political pressure for future SDN listings. Dahua, iFLYTEK, SenseTime, Megvii, and DJI—leading Chinese sellers of digital cameras, artificial intelligence software, and drones—have all been cited for supporting Xinjiang repression, and each already faces some of the same restrictive measures currently placed on Hikvision. If Hikvision goes on the SDN List, members of Congress and U.S. commentators would quickly call for designating these other firms, too. Uncorking the SDN List for Xinjiang abuses would also embolden those who have already called for even broader designations of Chinese firms involved in “ordinary” mass surveillance and cyber espionage.

Any further SDN listings would effectively declare economic war on growing portions of the Chinese tech sector—with serious and unpredictable consequences for bilateral relations, global stability, and the U.S. economy. Alternatively, the U.S. government could treat Hikvision as a special case and try to explain why. But Washington has often failed to give clear, principled rationales for its China-tech restrictions that persuade key audiences.

Related analysis from Carnegie

• U.S.-China Technological “Decoupling”: A Strategy and Policy Framework

If U.S. leaders can’t convincing justify whatever line they may wish to draw around Hikvision, then Beijing, other governments, and the global private sector could come to expect a much more serious and abrupt technological decoupling than U.S. leaders really intend. These actors could choose to “self-decouple” now on their own terms—preemptively avoiding and winding down investments, relationships, and other long-term commitments that depend on enduring U.S.-China tech ties. Yet much of these commercial dealings and scientific collaborations benefit the U.S. economy and national security. The United States risks setting in motion a broader, faster, and messier decoupling than it wants or can afford. (My recent report on U.S.-China technological decoupling explores these dynamics in depth.)

To avoid spooking others and ceding control to them, Washington’s restrictive actions must be narrowly targeted and have definite limiting principles. Placing Hikvision on the SDN List is the opposite of this prudent approach.

But isn’t bold U.S. action needed to deter and disrupt China’s abhorrent campaign against the Uyghurs? The situation in Xinjiang is a crisis that must be the top focus of U.S. policy regarding Chinese human rights. Washington has been right to impose a number of Xinjiang-related restrictions, including its targeted actions against Chinese tech companies and a new presumptive ban on all Xinjiang-derived imports. The United States can and should do even more to curb the flow of its technologies into Xinjiang. Tailored export controls could be placed on additional technologies such as enterprise software or heavy “smart” equipment that often require customization and ongoing technical support, making it possible to block export or diversion to Xinjiang. Taken in partnership with other countries, such actions could have a chance of making some difference. More realistically, they can limit American moral complicity.

Yet Washington must recognize the limits of its power and the risks of overreach. It is hard to imagine that placing Hikvision on the SDN List could substantially alter China’s Xinjiang policies. U.S. sanctions often fail to change their target’s behavior, and Beijing has adhered to its treatment of Hong Kong, Tibet, and Xinjiang despite overwhelming international outrage. Any hope of changing China’s calculus would require many countries—representing the bulk of global trade and diplomatic heft—to coordinate in carefully planned ways. Such a full-throated international campaign would call for much greater leverage and delicate direct negotiations with China. Ad hoc, unilateral U.S. sanctions on Hikvision would accomplish little while risking great harm to American interests.

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