Teaching Resources
Role-Play Exercise

Silverlake in China: Investor Responsibility for State Surveillance in Xinjiang

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September 10, 2023

Silverlake in China

Investor Responsibility for State Surveillance in Xinjiang

The allure of doing business in and with China is obvious. According to the World Bank, the Chinese consumer market is now the third-biggest in the world after the US and the EU. China also continues to be the largest global manufacturer of electronics, apparel, toys, and many other products. Given these economic realities, global companies will continue to look for opportunities to do business in China. An important factor fueling this growth has been the government’s embrace of a market-based system and its move away from the economic orthodoxy of its past. Unfortunately, the Chinese government has refused to show a concomitant willingness to reform its political system. The gross abuses of human rights we see today against the Uyghurs in Xinjiang and the efforts to crush democratic freedoms in Hong Kong are two striking examples of this resistance. Since Xi Jinping came to power, the human rights situation in China has grown worse, and in some ways dramatically so.

The 11 million Uyghurs in Xinjiang have faced systematic discrimination and persecution by the Chinese government for many years. Recently, the scope and scale of these violations have escalated dramatically. The imprisonment of more than a million Uyghurs today makes it the most egregious example of arbitrary detention anywhere in the world. Thousands more endure forced labor, and virtually everyone in that community is subject to pervasive surveillance and isolation from the outside world.

The Chinese government continues to use advanced technology to stifle dissent and to intrude on the privacy of its people. Chinese authorities have attempted to justify this mass surveillance as a tool to fight terrorism, but most of what the system tracks has no relationship to threats of terrorism or extremism. A recent Human Rights Watch report about the Chinese government’s “Strike Hard Campaign” in Xinjiang highlights the risks. In that region, the government has used what it calls the Integrated Joint Operations Platform (IJOP) to perform sweeping surveillance of the Uyghurs and other members of the Turkic Muslim minority. This app collects huge amounts of personal information, including blood type and other physical characteristics, education level, and religious and political affiliations. The IJOP also reports on activities the government deems suspicious, such as the use of encrypted communication tools like WhatsApp and Viber. The IJOP surveils and collects data on every person in Xinjiang, tracking their movements by monitoring the location of their phones, ID cards, and vehicles.  Information collected through the IJOP system is used as a basis for house arrest or more formal detention. Failure to carry a smartphone can itself be a basis for detention.

In some recently reported cases, US companies and investors have played a role in this system. US investor ties to SenseTime provide one example. SenseTime is a Chinese company focused on artificial intelligence and facial recognition. The company’s valuation surpassed $7.5 billion according to SenseTime CEO Xu Li, making it the world’s highest valued artificial intelligence company. In February 2018, MIT announced a wide-ranging partnership with SenseTime as part of its MIT Intelligence Quest initiative, aimed at advancing research into human and machine intelligence. In May, 2018, the company raised $620 million in new funds, led by Silver Lake and  others. Silver Lake is an American private equity firm focused on leveraged buyout and growth capital investments in technology, technology-enabled and related industries. According to one report, among US-based institutions with stakes in SenseTime, “public pension funds are the largest committers of capital.” The Florida Retirement System is one such public pension fund which is an indirect investor in SenseTime through Silver Lake.

On October 1st, the US Commerce Department added SenseTime and seven other Chinese technology companies to its  Entity List, which prevents US companies from selling their products without government approval. According to the Commerce Department, the entities were added to the list because they are “implicated in human rights violations and abuses in China’s campaign targeting Uyghurs and other predominantly Muslim ethnic minorities” in Xinjiang, and more specifically, in “China’s campaign of repression, mass arbitrary detention, and high-technology surveillance.”

Our broad question is: how should US companies and investors respond when SenseTime and other technology firms are added to the Entity List? What affirmative responsibilities, if any, do US companies and investors bear for addressing privacy rights and for declining to invest in or have commercial relationships with Chinese firms like SenseTime that are assisting the mass surveillance efforts in  Xinjiang.

As you follow the prompt for your role, please keep in mind these overarching questions:

 

You will be divided into five groups:

  1. Silver Lake’s C-Suite
  2. Silver Lake’s Fundraising & Investor Relations Team
  3. Massachusetts Institute of Technology Intelligence Quest Oversight Team
  4. Florida State Board of Administration
  5. Congressional-Executive Commission on China

 

Role: Silver Lake’s C-Suite

Task: You are responsible for determining Silver Lake’s investment portfolio. You must decide whether to continue investing in SenseTime, and craft a policy for making such determinations in the future.

Role: Silver Lake’s Fundraising & Investor Relations Team

Task: You are the primary liaison to Silver Lake’s investors. You need to prepare a statement addressing the placement of SenseTime on the Entity List, the continuation or ending of Silver Lake’s relationship with SenseTime, and a description of how Silver Lake addresses human rights concerns in its investment decision-making.

 

 

Role: Massachusetts Institute of Technology Intelligence Quest Oversight Team 

Task: You oversee the MIT Intelligence Quest. You must decide whether to end the MIT-SenseTime Alliance on Artificial Intelligence, how to address the alliance to the school community, and craft a policy for similar situations in the future.

 

Role: Florida State Board of Administration

Task: You manage the assets of the Florida Retirement System. You must decide whether to divest from Silver Lake, how to address your indirect investment in SenseTime to the Florida public, and craft a policy to guide future investment decisions based on human rights implications.

 

Role: Congressional-Executive Commission on China

Task: You are a Congressional member of this bipartisan commission. You must identify steps you can take to address the situation in Xinjiang, and the ties between US companies and investors and the enforcement of repressive policies against the Uyghur minority by the Chinese government.

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