Hikvision PRC Government Origin And Control

By: John Honovich, Published on Aug 29, 2016

Hikvision originated from a PRC China government research institute.

This is uncommon in the West but frequent in China (though Hikvision is the Chinese government's only controlled video surveillance manufacturer). Hikvision was founded from the PRC government's "No. 52 Research Institute", one of dozens of research institutes that the PRC government has founded in various electronics / technology domains.

Indeed, to this day, as financial records show, the PRC government remains the 'controlling shareholder' of Hikvision. By contrast, Hikvision's overseas marketing obscures their origin and downplays government ownership as just one of many 'shareholders' rather than the controlling one it is.

CETC

The Chinese government division that founded Hikvision is the China Electronic Technology Corporation Group [link no longer available] (CETC), which they explain [link no longer available] "is made up of 58 member units and 8 listed companies." Originally, Hikvision was one of the member units [link no longer available], as one of the numerous research institutes. Later, it was promoted to a CETC 'listed' company [link no longer available], when the Chinese government listed Hikvision in the Shenzhen stock exchange.

[link no longer available]

Connection Government / 52nd / Hikvision

The Hikvision 2015 annual report (p. 62) makes clear the connection, explaining that Hikvision's chairman is a Communist Party Secretary:

Chen currently serves as the head of 52nd Institute, the chairman and the Communist Party secretary of China Electronics Technology HIK Group Co., Ltd. (中电海康集团, CETHIK) and chairman of the Company [Hikvision]

Hikvision Government Ownership and Control

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However, Hikvision obscures their origin and ownership by stating:

42% of the company is jointly owned by CETHIK Group and CETG No. 52 Research Institute, both are state-owned enterprises.

Knowing Hikvision's origin makes clear the reference to CETG No. 52, the government research institute that founded Hikvision. Also, CETHIK, as the chairman's description above indicates, is another division within the government-run China Electronic Technology group that oversees 'HIK' / Hikvision.

Controlling Shareholder - China Government

Most importantly, Hikvision's own financial report (p. 56) confirms that they are still, to this day, controlled by the Chinese government through CETC:

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Foundation / Ownership / Funding

Hikvision has been a division of the PRC government from the beginning. They have evolved over time, including the new $6 billion of government funding, but their origin reflects their continued reality as a division of the PRC government.

Update: "Exert Significant Influence"

In an investor prospectus, Hikvision disclosed that the PRC government, as their controlling shareholder:

will continue to be in a position to exert significant influence over our business and other matters of significance to us.

has substantial control over [Hikvision] and their interests may not be aligned with the interests of our other shareholders

may improperly control the significant business, finance and personnel of [Hikvision] by way of exercising the voting rights, which will damage the interests of [Hikvision] and its other shareholders.

This is from the investor prospectus p.33, the full paragraph below:

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Not only does the PRC government have such control, Hikvision also touts strong support from the Chinese (PRC) government as well acknowledging their 'state-owned parent' (CETC / CETHIK):

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Contrary to Hikvision Marketing

To the contrary, Hikvision's overseas marketing has repeatedly portrayed Hikvision as a commercial entity simply with private and public shareholders (e.g., Security World: Hikvision responds to accusations of being a cyber security risk).

Quiz

See how well you know the relationship between Hikvision and the Chinese government with this 5 question quiz.

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