SINGAPORE -- China's government struck a confident note after some of its leading artificial intelligence startups were placed on the U.S. commerce department's entity list in October last year.
The so-called blacklisting barred eight mainland companies from buying components from American suppliers over their alleged involvement in human rights abuses against Uighurs and other predominantly Muslim minorities in Xinjiang Province.
The move was a shock to many of the AI startups, all of which constituted some of the largest and most successful AI companies in the world, according to the Center for Strategic and International Studies, which added that the U.S. decision aligned with the Trump administration's broader goal of protecting American interests in AI.
But a defiant Beijing said the move could not "hurt the fundamentals of China's technological development."
Just over ten months later, as Sino-U.S. tensions ratchet up ever further, that conviction appears justified as the companies raise money, win overseas business, and see their share prices rise.
SenseTime, a Beijing- and Hong Kong-based facial recognition company, is on track to raise at least $1 billion in funding from investors. Megvii, another startup headquartered in Beijing, is laying the groundwork to restart an initial public offering after the October news initially derailed its Hong Kong listing plans. Shenzhen-based iFlytek, a voice recognition company, reported surging revenues earlier this year.
Shares in China-listed Hikvision and Dahua, which make surveillance equipment, are up more than 25% and 30% respectively since they were blacklisted along with their AI peers.
Their resilience further fuels the view that U.S. steps to isolate and contain China's technological rise are only going to make Beijing more determined to become self-sufficient in key technologies.
Nor are the successes simply confined to the mainland. Both Megvii and SenseTime have won overseas contracts this year across Asia and the Middle East as demand for all types of surveillance technology rises globally.
Megvii, whose backers include Australia-based Macquarie Group and the Abu Dhabi Investment Authority, rolled out its AI-backed intelligent temperature measurement systems to help control the spread of COVID-19 in high-density locations, including at a high school in Gifu Prefecture in central Japan and office buildings in Dubai.
SenseTime, whose investors include Fidelity, Qualcomm and Silver Lake, won a deal with a Thai property developer for AI cloud computing services and was shortlisted to help a major Japanese company upgrade its expressway monitoring system.
There are more such deals in the pipeline for both companies.
This suggests other governments and countries are less convinced of the U.S. stance toward China's high-tech drive, particularly when it comes to technology as important and crucial as AI.
The U.S. approach also risks it being unable to recruit talent in this sector.
China has already surpassed the U.S. in published AI papers, according to an analysis by the Allen Institute for Artificial Intelligence last year. If current trends continue, China is poised to overtake the U.S. in the most-cited 50% of papers this year and in the most-cited 10% of papers next year.
"Recent U.S. actions that place obstacles to recruiting and retaining foreign students and scholars are likely to exacerbate the trend toward Chinese supremacy in AI research," the Allen Institute concluded.
Concerns about Chinese companies aiding human rights abuses in Xinjiang are legitimate and must be addressed. But the resurgence of blacklisted companies this year suggests current methods to address them may end up mostly hurting Washington.
Scott Kennedy of the Center for Strategic and International Studies last month offered a sobering conclusion to the U.S. strategy toward Chinese technology, including the treatment of equipment maker Huawei.
"The current road to outright decoupling is a race to the bottom, a chaotic and unprincipled slugfest, with the United States ending up as isolated as China."
Mercedes Ruehl is the Financial Times' Asia Tech reporter based in Singapore. She writes about technology and investment in Asia, from startups and entrepreneurs to the region's biggest companies.
She previously led the Financial Times' newsletters and audience engagement team in Asia. Before that, she spent six years reporting in Australia on business, finance and politics for The Australian Financial Review and The Sydney Morning Herald.
