A Chinese facial-recognition startup is promising to be good in its IPO filing

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Megvii Technology, a Chinese artificial intelligence start-up that provides face-scanning technology to clients that include the Chinese government, has filed to list in Hong Kong amid the city’s ongoing protests. It would be the first of a crop of Chinese AI startups to go public.

In a letter from its CEO included in its IPO filing yesterday (Aug. 25), the company spoke to concerns that have arisen about China’s widespread adoption of AI, and facial-recognition in particular, and said its goal is to use artificial intelligence in “engineering for good” in the world.

“The ethical challenges that AI scientists are facing and the debates that the world is having about AI are not unique to China or to Megvii… As a pioneer of the AI industry, we have a responsibility to make sure our technology is engineering good in the world,” wrote Yin Qi, Megvii’s co-founder and CEO.

The company, founded in 2011 and valued at over $4 billion, has rapidly become known at home for its Face++ facial recognition software. Its clients range from fintech players like Alibaba Groups’s Ant Financial to Chinese public security bureaus in over 260 cities, where it has led to some 10,000 arrests, according to Bloomberg. Along the way, it has faced questions about how it’s deploying this powerful tech, especially as the Chinese government has increasingly used AI to monitor its own citizens.

In May, New York-based Human Rights Watch (HNW) said the company provided facial-recognition functionality  to a mobile app used to track citizens in far-western Chinese region Xinjiang, where over 1 million Uyghur Muslims are estimated to have been forced to attend so-called “re-education” camps. The watchdog later withdrew this assertion, saying the Megvii code that appeared in the app was “inoperable” and that the firm “seems not to have collaborated” in the development of the app. Megvii also told HRW it had no involvement in the app.

Moreover, the Chinese startup is also in the crosshairs of the Trump administration, which could see it dragged into the ongoing trade fight with China for over a year. The company reportedly risks being added to a list of Chinese entities banned from getting components or tech from American companies, along with other four Chinese AI startups. Washington is concerned about the companies’ roles in helping Beijing track and repress minority Uighurs in Xinjiang, as well as the potential use of their technology in espionage.

The letter appears to be aimed at addressing those concerns. The firm cited “flaws or misuse of AI technologies, whether actual or perceived, whether intended or inadvertent, whether committed by us or by other third parties” and “rumours or negative publicity,” as well as “more drastic measures” from the US as among its major risk factors in the filing. In addition, the Chinese firm also said that it has set up (pdf, p. 3) an AI Ethics Committee with external members to review ethical issues in the AI industry and the company. The company’s products, meanwhile, are also “structured to guard against weaponization and misuse of our technology,” it said.

“We require our customers to covenant to us that they will not use our technologies for any illegal or inappropriate purposes, including infringement of human rights. Such covenant is also included in the terms of use of our Face++ open platform,” said the company.

Proposing to list ahead of its major Chinese rival SenseTime, Megvii faces a series of challenges. Hong Kong’s protests against an extradition bill that have lasted for over 12 weeks and prompted one of Megvii’s backers, e-commerce giant Alibaba, to postpone its mega secondary listing, could weigh on its performance. The company’s  increasing losses, which went from 343 million yuan ($48 million) in 2016 to 3.4 billion yuan in 2018, and ballooned in the first six months of this year to 5.2 billion yuan ($727 million), will also test investors’ confidence. The losses come despite its 2018 revenues growing to 1.4 billion yuan, a 350% increase compared with the previous year. The company has said they are due in part to rising investments in R&D.

Megvii did not reply to a request for comment.

Correction: Megvii no longer powers Alipay’s “scan to pay” feature as the article earlier stated.