China’s Dahua Technology to Withdraw from Xinjiang Projects

BEIJING, Dec 23 (Reuters) - Zhejiang Dahua Technology (002236.SZ), a prominent Chinese video surveillance equipment manufacturer, announced in a stock exchange filing on Monday that it and its subsidiaries have decided to terminate or exit five projects previously signed with local governments in China’s Xinjiang region.Some of the projects, which were awarded between 2016 and 2017, have been terminated ahead of schedule, while others are still in operation, Zhejiang Dahua Technology disclosed in its filing to the Shenzhen stock exchange.

The company did not specify the reasons for the premature termination or provide details on the ongoing projects that remain active.The projects in question were part of Dahua's broader portfolio in the Xinjiang region, where the company has supplied video surveillance and security systems for various governmental and municipal initiatives.These developments come amid growing international scrutiny over surveillance practices in the region, with human rights groups and global stakeholders raising concerns about their potential misuse.Dahua’s filing reflects an acknowledgment of shifting dynamics in the business environment, possibly influenced by both domestic policy adjustments and external pressures related to corporate accountability in sensitive regions.However, the company has yet to clarify whether these decisions are part of a larger strategic pivot or are isolated cases related to specific projects.

The termination of these agreements may have implications for Dahua's financial performance, particularly given the size and scope of its operations in the Xinjiang region. Stakeholders will likely be monitoring for further updates on how the company plans to address these changes and their potential impact on its business trajectory.The company stated that it will cease operating the projects and proceed with asset disposal and debt resolution efforts.However, Zhejiang Dahua Technology did not provide a specific reason for its withdrawal from the contracts.

Dahua’s announcement follows a similar move by another Chinese surveillance camera manufacturer, Hikvision (002415.SZ), which revealed earlier this month that it had exited contracts with five local governments in Xinjiang.Like Dahua, Hikvision did not elaborate on the reasons for its decision to pull out of these agreements.Both companies have faced increasing scrutiny over their involvement in Xinjiang, where allegations of human rights abuses and extensive surveillance of ethnic minorities have drawn widespread international criticism.These developments suggest a broader trend of Chinese technology firms reevaluating their operations in politically sensitive regions, possibly due to external pressures or changing domestic strategies.The decision to terminate these projects raises questions about the implications for the companies’ financial performance and their standing in the global market, as both Dahua and Hikvision have been major players in the surveillance industry.

Analysts will likely be watching closely for further statements or clarifications from the companies regarding their withdrawals and how they plan to navigate the ongoing scrutiny surrounding their activities in Xinjiang.The United States added Dahua and seven other Chinese technology firms to its trading blacklist in 2019, alleging they were "implicated" in "repression and high-tech surveillance" targeting Uyghurs and other Muslim minority groups in Xinjiang. The blacklisting restricted these companies' access to U.S. technologies and markets.At the time, Dahua dismissed the U.S. decision, stating that it lacked "any factual basis." The Chinese government has also consistently denied allegations of human rights abuses in Xinjiang, defending its policies in the region as necessary for counterterrorism and economic development.

Furthermore, Beijing has criticized foreign governments and companies that remove firms operating in Xinjiang from their supply chains, accusing them of politicizing business decisions and interfering in China's domestic affairs.The blacklisting and international scrutiny have placed additional pressure on Chinese tech companies like Dahua, compelling them to reassess their operations and strategies in Xinjiang and beyond. These developments highlight the growing intersection of global trade, human rights concerns, and geopolitical tensions, with significant implications for the surveillance technology sector.