Dahua and Hikvision Win Over $1 Billion In Government-Backed Projects In XinjiangBy: Charles Rollet, Published on Apr 23, 2018
Dahua and Hikvision have won well over $1 billion worth of government-backed surveillance projects in China’s restive Xinjiang province since 2016, IPVM has verified from Chinese sources.
Xinjiang has become an international controversy over human rights abuses, e.g., the WSJ's investigation into China' 'total surveillance state' followed by the Chinese government attacking those reports.
Inside this note, we examine the projects and the impact this is having for Dahua and Hikvision.
IPVM Confirms Xinjiang Projects Worth Over $1 Billion
Using data from bidding websites, the companies’ own disclosures, and Chinese trade publications, IPVM found 11 Hikvision and Dahua PPP (Public-Private Partnership) projects in Xinjiang worth a total of 7+ billion yuan / over $1 billion USD.
The projects include:
- Safe County PPP Project in Yarkant County [link no longer available]
- Shihezi Safe City PPP Project [link no longer available]
- Urumqi Hi-Tech Zone Safe City Project
- Qiemo Safe County PPP Project [link no longer available]
- Yutian County Safe City PPP Project [link no longer available]
- Lop County Social Security PPP Project
- Pishan County Facial Recognition System PPP Project [link no longer available]
- Karakax County Social Defence System PPP Project [link no longer available]
- Hotan County Public Security Checkpoint PPP Project
- Qira County Smart City PPP Project
- Yopurga County Safe City PPP Project
The total amount of projects for Dahua and Hikvision are minimally this but could be more depending on what other projects are either not publicly disclosed or we did not find.
Massive Scope is Unsurprising
The huge expenditures are unsurprising given the Chinese government’s unprecedented levels of security spending in Xinjiang Province, home to the Muslim minority Uighur population. According to the Financial Times, total public security spending almost doubled in Xinjiang in 2017 to nearly $10 billion.
Much of that money is going into “Safe City” or “Safe County” projects. Dahua appears to be leading the way in this regard: in July 2017 it won the contract for a single 10-year “Safe County” project worth over 4.3 billion yuan or $685m in Xinjiang’s Yarkant County, the site of violent riots that caused at least 100 deaths in 2014.
The project was notable enough for Dahua to file a standalone disclosure [link no longer available] about it at the Shenzhen stock exchange where it is listed. Although it’s not clear in all the projects counted by IPVM what portion of total investment comes from the government, this particular disclosure noted that “during the licensed period, the total amount paid by the government is 4,314,790,000 yuan.”
Enormous Compared To Western Scale
In the West, even $10 million video surveillance contracts are uncommon and the sheer number and size of these projects in Xinjiang are beyond any parallel with Western deployments and companies. As a rough sense of scale, Axis 2017 global revenue was about the same as these contracts for a Chinese province with ~20 million people.
Significant Force For Dahua And Hikvision Growth
Dahua and Hikvision continue to grow rapidly, at ~30% annual growth from an already massive size (compared to Western standards). Projects like these are key components of achieving that growth. For example, we estimate Dahua USA's branded sales to be in $10 - $30 million range for 2017, compared to the hundreds of millions in contracts just in Xinjiang. Moreover, while Western professionals see these companies most commonly selling low-cost cameras for sale at distribution, these projects show that, inside China, the companies are far different, acting as mega-scale direct government contractors.
Xinjiang Human Rights Concerns
Human rights groups have repeatedly criticized China's government for violating Xinjiang's Muslim population's rights, particularly the Uyghur minority ethnic group, some of whom seek independence from China. Xinjiang has long been a restive province in China, notably after violent riots left hundreds dead in the capital of Urumqi in 2009 and terrorist attacks killed 35 in China's southern city of Kunming in 2014. As a result, China has reportedly cracked down on the province, with International media and human rights group calling out numerous issues:
- Bloomberg reported that Xinjiang is China's "surveillance laboratory" and is developing a facial recognition system that detects when certain Xinjiang residents move 1,000 feet beyond designated safe areas.
- Human Rights Watch said Chinese authorities were building an advanced "predictive policing program" in Xinjiang that collected data about people, often without their knowledge, and sent thousands for re-education
- Human Rights Watch also said China was collecting the DNA samples, blood type, fingerprints, and iris scans of all Xinjiang residents between the ages of 12 and 65
- Buzzfeed reported that even gas stations required Xinjiang residents to be scanned by a facial recognition camera before filling up
- Reuters reported that Xinjiang authorities had banned people from growing overly long bears (a sign of Islamic piety)
- According to the Wall Street Journal, knives sold in the province must be etched with tracking numbers identifying the buyer.
While the implementation of these surveillance tactics generates significant revenue for manufacturers like Dahua and Hikvision, it also raises concerns about the ethics and the appropriateness of participating in such practices.
Update August 2018 - Congressional Letter
The WSJ is reporting that 17 Congresspeople have signed a letter urging sanctions against Dahua and Hikvision for profiting off these human rights abuses.