Did You Know KKR Formed a Chinese Surveillance Company?

*Still shot from a Cue Group video on its 2021 website, accessed 5/26/2021*

In 2017, KKR Asian Fund III – an entity controlled by KKR & Co. – formed Shanghai Kaiyu Information Technology Co., Ltd. 上海开域信息科技有限公司 , a Chinese artificial intelligence (AI) and big data company commonly called Cue. Until November 1, 2021, a majority of Cue’s directors were KKR executives, and as of February 2022, KKR says it owns only a minority interest in Cue.

Cue and the personal company of Cue’s CEO Shi Kan 施侃 partnered with the Chinese state security apparatus between 2018 and 2020. Cue and Shi Kan’s personal company Zhuhai Zhongdun Star Technology developed technology for government surveillance programs jointly with the Video National Engineering Laboratory Zhuhai Innovation Center, an arm of China’s Ministry of Public Security. Zhuhai Zhongdun partnered with the Zhuhai Lab in 2018 and 2019, according to articles, and an April 2020 posting on Cue’s website described Cue’s collaboration with the lab. KKR listed Cue and Zhuhai Zhongdun as indirect subsidiaries in a government filing in February 2020.

Cue’s public security collaboration was profiled in a February 20, 2022 report by The Wire China entitled “The Surveillance Stake”. KKR and Cue denied the collaboration to The Wire, however “…the Zhuhai lab confirmed in an email to The Wire that it had at one time collaborated with Cue and one of its wholly-owned subsidiaries.”

As The Wire notes:

“The fact that KKR had a controlling stake in Cue Group while Cue was openly promoting its connection to the MPS lab is ‘a wake up call’ to global companies, says Michael Santoro, a corporate ethics expert at the Santa Clara University’s Leavey School of Business. If a private equity firm’s portfolio company works with China’s surveillance apparatus, he says, ‘It could hardly be a more direct line between their investment and human rights violations.’”
“The Surveillance Stake” The Wire China 2/20/2022

Now, KKR and Cue are taking steps to cover up this collaboration.

At a time when the US government is scrutinizing Chinese technology companies, sanctioning Xinjiang’s governing body, and adding multiple Xinjiang-area Public Security Bureaus to the Export Administration’s Entity List restricting commerce with US companies, and when Chinese regulators are stepping up enforcement against technology companies and their foreign investors, investors should seek greater transparency from KKR about its Chinese technology investments.