US Preparing Restrictions on Chinese Software Companies, Focusing on Human Rights Penalties, Pompeo Says

The U.S. will boost restrictions on software companies connected to China, Secretary of State Mike Pompeo said, adding that the administration is focused on increasing penalties on businesses associated with human rights abuses in the Xinjiang region. Pompeo said the companies’ use of facial recognition and artificial intelligence software -- two areas the Commerce Department is reviewing for stricter export controls (see 2007220050) -- aids the Chinese military and helps to suppress Muslim minority groups.

President Donald Trump “will take action in the coming days with respect to a broad array of national security risks that are presented by software connected to the Chinese Communist Party,” Pompeo told Fox News Aug. 2. The secretary cited TikTok and WeChat but also said “countless” Chinese companies are “feeding data directly” to the Chinese government. “Those are the issues that President Trump has made clear we’re going to take care of,” he said. “These are true national security issues.”

The U.S. most recently imposed sanctions on China’s Xinjiang Production and Construction Corps, which Pompeo said has “deep connectivity” to Western businesses through cotton trade (see 2007310028). The designation could “threaten” global cotton supply chains, the Sandler Travis law firm said Aug. 1, adding that China accounts for 20% of the world’s cotton and Xinjiang accounts for 80% of China’s cotton.

The designation will put businesses operating in the region “on notice [that] they’ve got to change their behavior, they’ve got to stop using slave labor,” Pompeo said. “We’re going to impose real costs on those businesses.” Pompeo said that more U.S. companies are beginning to address supply chain risks and other trade issues presented by China (see 2007300044), although he again scoffed at comments last week by the CEOs of Google, Apple and Amazon, who said they were not aware of Chinese attempts to steal technology from their companies. “That’s crazy talk,” Pompeo said.

But the secretary said he is seeing more international and domestic consensus on threats posed by China. The administration is “getting nearly every member of Congress aligned” on Chinese policies, he said, pointing to recent legislation to sanction China over Hong Kong (see 2007020046).

“I think the tide is turning,” Pompeo said. “I think not only here in the United States but all across the world the threat from the Chinese Communist Party is becoming clearer and clearer, and nations that are like-minded all across the world are beginning to come together to rebalance, to push back against this.”