SHENZHEN, China, Sept. 7 — Li Runsen, the powerful technology director of China’s ministry of public security, is best known for leading Project Golden Shield, China’s intensive effort to strengthen police control over the Internet.
But last month Mr. Li took an additional title: director for China Security and Surveillance Technology, a fast-growing company that installs and sometimes operates surveillance systems for Chinese police agencies, jails and banks, among other customers. The company has just been approved for a listing on the New York Stock Exchange.
The company’s listing and Mr. Li’s membership on its board are just the latest signs of ever-closer ties among Wall Street, surveillance companies and the Chinese government’s security apparatus.
Wall Street analysts now follow the growth of companies that install surveillance systems providing Chinese police stations with 24-hour video feeds from nearby Internet cafes. Hedge fund money from the United States has paid for the development of not just better video cameras, but face-recognition software and even newer behavior-recognition software designed to spot the beginnings of a street protest and notify police.
Now, the ties between China’s surveillance sector and American capital markets are starting to draw Washington’s attention.
Rep. Tom Lantos, the California Democrat who is chairman of the House Foreign Affairs Committee, said he was disturbed by a recent report in The New York Times about the development of surveillance systems in China by another company, China Public Security Technology, which, like China Security and Surveillance, incorporated itself in the United States to make it easier to sell shares to Western investors.
Mr. Lantos called American involvement in the Chinese surveillance industry “an absolutely incredible phenomenon of extreme corporate irresponsibility.”
He said he planned to broaden an existing investigation into “the cooperation of American companies in the Chinese police state.”
Executives of Chinese surveillance companies say they are helping their government reduce street crime, preserve social stability and prevent terrorism. They note that London has a more sophisticated surveillance system, although the Chinese system will soon be far more extensive...
The New York Stock Exchange said that it had no comment except to confirm that China Security and Surveillance was expected to list on the exchange “later this year, subject to the usual conditions, including approval by the S.E.C.”
Because the company already has shares traded in the United States and is not selling any additional shares, Securities and Exchange Commission regulations say approval is automatic once the company fills out a notification form and the New York Stock Exchange confirms it has approved the listing.
Over the last year, American hedge funds have put more than $150 million into Chinese surveillance companies.
The Chinese government trade association for surveillance companies, which also regulates the industry, predicts that the surveillance market here will expand to more than $43.1 billion by 2010, compared with less than $500 million in 2003. Under the Safe Cities program adopted by the government last winter, 660 cities are starting work on high-tech surveillance systems...
China Security and Surveillance has been aggressively raising money in the United States, including $110 million in convertible loans so far this year from the Citadel Group, a big hedge fund in Chicago. In the last 18 months, the company has used the money to acquire or make a deal to buy 10 of the 50 largest surveillance companies in China.
James Mulvenon, the director of the Center for Intelligence Research and Analysis, which does classified analyses of foreign military and intelligence programs for the Pentagon and other government agencies, said that Beijing clearly wanted the company to consolidate the industry.
“They’re really sort of the Ministry of Public Security’s national champion,” Mr. Mulvenon said of China Security and Surveillance. “In terms of the gear and building the surveillance society, they are the ones.”
After the company announced sharply higher sales and profit on Aug. 13, a succession of American hedge fund managers and investment bank analysts took turns on a conference call questioning and congratulating Mr. Yap.
Traded on the over-the-counter bulletin board market while waiting for the beginning of trading on the New York Stock Exchange, the company has raised almost all of its money through the Citadel loans and private placements of stock with 17 institutional investors in the United States, including the Pinnacle Fund and Pinnacle China Fund in Plano, Tex., and JLF, a hedge fund based in Del Mar, Calif.
The Pinnacle funds’ investments have risen six-fold in 17 months. The funds, which raise all their money in the United States, are also the main investors in China Public Security Technology, with a stake that has nearly tripled in value since February...
So they use our private security companies and funds. One wonders if "we" use theirs for things we don't want to talk about in polite company too...
[with a tip of the tinfoil to TomDispatch]
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