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As the government cracks down on more and more Chinese companies, these companies are disguising themselves as American businesses.

From The Wall Street Journal. In December, a new company registered in Michigan: American Lidar. Its planned home would be an easy drive from the big three U.S. automakers.

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The company behind American Lidar, and not mentioned in its registration, is China-based lidar maker Hesai Group, which the U.S. has labeled a security concern. It is a familiar playbook: A company facing regulatory or reputational problems sets up a subsidiary or affiliate with a different name.

Chinese firms trying to buffer themselves from Washington’s anti-China policies are rebranding and creating U.S.-domiciled businesses to sell their wares as the Biden administration expands the government entity lists that restrict Chinese companies’ business dealings in the U.S., say policymakers and national-security experts. …

“Chinese firms take a blow but then adjust business strategy and are able to move in another direction,” said Derek Scissors, a former commissioner on the U.S.-China Economic and Security Review Commission. …

Lidar debate

Lidar maker Hesai became a target in the U.S.-China tech-trade war after allegations that its laser sensors, which are important to the U.S. auto industry and military, could be used to collect sensitive American data. Lidar allows cars to recognize their surrounding environment, enabling features such as lane keeping and automatic braking.

A month after it set up American Lidar to be its manufacturing facility in the U.S. heartland, Hesai was added to the Defense Department list that designates companies as Chinese military entities operating in the U.S. Its stock fell 30% in a day after the list was published and hasn’t recovered. Almost one-fifth of Hesai’s revenue comes from the U.S.

The Pentagon’s designation prohibits the U.S. military from buying Hesai products. Automakers and other private companies can remain buyers. …

A Hesai spokeswoman said the name American Lidar was a placeholder, but the company wanted to communicate that the products would be made and sold in the U.S. Hesai has since paused plans for the American Lidar facility, blaming the fallout from being labeled a Chinese military entity.

Hesai filed a lawsuit this month against the Defense Department, asserting it should be removed from the list because it has no affiliation with any military and isn’t controlled by the Chinese government. …

National-security experts and lawyers say singling out individual Chinese companies invites rebranding and obfuscation.

“You should not be sanctioning individual firms, you should be sanctioning technology sectors,” said Scissors, the former commissioner who is also a senior fellow at the think tank American Enterprise Institute, which advocates for assertive policies to deal with China. …

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(Excerpt from The Wall Street Journal. Photo Credit: Arthur Wang on Unsplash)