Alibaba-backed tech company’s $1 billion IPO in peril

Donald Trump’s latest salvo against China threatens to derail a $1 billion coming-out party for a prominent startup backed by Alibaba Group Holding Ltd., while curtailing the country's broader ambitions of leading artificial intelligence in the coming decade.

The US placed eight Chinese technology giants on a US blacklist on Monday, accusing them of being implicated in human rights violations against Muslim minorities in the country’s far-western region of Xinjiang. Among those singled out for sweeping American export restrictions were SenseTime Group Ltd., the world’s largest artificial intelligence startup, and Megvii Technology Ltd. — two giant enterprises Beijing is counting on to spearhead advances into a revolutionary technology, aided by billions of dollars in foreign backing.



The White House’s actions — announced days before sensitive trade negotiations resume in Washington — cast a pall over not just Megvii’s capital-raising effort but the burgeoning Chinese sector.

Leading players like SenseTime and Megvii, already having trouble securing financing during an economic downturn, had considered international forays to sustain a sizzling pace of growth.

The Commerce Department’s action threatens to derail that effort while spooking the business, supply and research partners needed over the longer term.

“This will make people think twice about working with these companies even if there are no legal reasons preventing them from doing so,” said Isaac Stone Fish, a senior fellow with the Asia Society's Center on US-China Relations. “Reputational costs will be greater than financial costs.”

Monday’s move marks another escalation in a US effort to contain China’s technological ascendancy, a campaign that began by slapping curbs on Huawei Technologies and now encompasses some of the country’s most promising startups.

Megvii’s IPO was supposed to have been the Chinese industry’s unofficial debut on the global stage. Already mothballed because of rising violence in Hong Kong, that offering now looks in question.