DJI maintains close ties to Chinese government new documents show

The Washington Post just reported that Chinese drone maker DJI maintains close ties to the Chinese government and received state funding, despite repeated claims to the contrary.

DJI, the world's largest drone manufacturer has always denied that it had received direct funding from the Chinese government.

New research and analysis by IPVM, a video surveillance research group based in Bethlehem, PA show that the drone maker has in fact received funding from the Chinese government and provides drones and other equipment to state agencies. The relevant documents have been reviewed by the Washington Post.

According to these documents, at least four investment funds that are owned or operated by the Chinese government have invested in DJI. One of these funds is a state asset manager that has promised to promote partnerships between the Chinese military and private enterprises.

State funding of DJI is deeply concerning

In an interview, Brandan Carr, the senior Republican on the Federal Communications Commission (FCC), said that the reports of Chinese state funding of DJI are ‘deeply concerning'.

In recent years, DJI has been under scrutiny by U.S. lawmakers for possible close ties to the Chinese government and the potential risk of data collected by DJI drones being sent back to China.

In December the U.S. Treasury Department added DJI to a US investment blacklist over the sales of drones to the Police in Xinjiang that were used to surveil ethnic Uyghurs.

DJI had already been added to the Commerce Department's Entity List in 2020. This meant that U.S.-based companies will no longer be allowed to export technology to the drone maker without an appropriate license from the Bureau of Industry and Security. 

Last year, the Department of Defense reiterated that its 2017 prohibition on the acquisition of DJI drones would stay in effect as the unmanned aircraft are deemed a national security threat.

Connections between DJI and the Chinese government difficult to uncover

IPVM explains that since DJI is not a publicly-traded company, and thus the list of investors and owners is not publicly available, it is very challenging to uncover any connections between the drone maker and the Chinese government.

The Washington Post reports that DJI did not provide any comments on questions related to Chinese government-controlled funding and that the drone maker denied having received ‘direct' investments from Beijing.

“DJI is privately held. The company is solely managed by and majority-owned by the founder team,” said Adam Lisberg, a DJI spokesman. “Shareholders other than the founders do not participate in the company's management and operation,”

China Chengtong Holdings Group, which is actively managed by Beijing's State-owned Assets Supervision and Administration Commission (SASAC), a ministerial-level organization tasked by China's State Council with handling the country's state-owned enterprises, is among the funds that list DJI as an investment.

“If SASAC isn't the PRC [People's Republic of China] government, I don't know what is. If SASAC has invested in you, that means the Chinese government has invested in you,” said Charles Rollet, the IPVM analyst. “It directly contradicts what [DJI spokespeople] have been touting to allay concerns around the Chinese government. DJI has been saying they have no Chinese government investments. This evidence directly contradicts that.”

According to a 2018 business report, China Chengtong invested in DJI through a government fund worth $55.3 billion. It's unclear how much money the fund put in. The fund was established in 2016 by China's State Council and SASAC and is led by China Chengtong's CEO, Zhu Bixin.

An article published on China Chengtong's website in October 2019 confirms the funding and includes photographs of the fund's deputy party secretary touring a DJI location in Shenzhen with a delegation to “perform special study” on the investment.

“DJI adheres to the guidance of Xi Jinping thought on socialism with Chinese characteristics for a new era,” the article stated

China Chengtong, reportedly says on its website that it aims to “to mainly serve the innovation and development of central enterprises … and increase capital support for major national strategies such as the Belt and Road project and military-civilian fusion.”

Military-civilian fusion is a national Chinese policy designed to remove barriers between the People's Liberation Army and some of the country's private high-tech enterprises, such as DJI.

The Shanghai Venture Capital Guidance Fund, which is run by the Shanghai Municipal Government, is another fund that has DJI as an investment. Guidance funds in China combine governmental and private assets to further Beijing's industrial development goals in developing industries.

According to a Chinese-language S&P global report published in March 2021, state-run Guangdong Hengjian Investment Holding invested in DJI together with SenseTime, which was also added to the Biden administration's sanctions list in December for human rights violations in Xinjiang.

DJI is also listed as an investment on the website of SDIC Unity Capital, a fund operated by the State Development & Investment Corporation (SDIC), a state-owned investment holding firm sanctioned by China's State Council.

According to the Washington Post, none of the four Chinese state investment funds responded to requests for comment.

DJI has always maintained that the company did not receive any Chinese government funding.

“DJI is managed and run by Wang and his founding colleagues. DJI did not receive any Chinese government investments, but American venture capital firms invested more than $100 million,” the drone maker said.

DJI in the U.S.

DJI continues to be the market leader in consumer drones in the United States. The drone maker held 77 percent of the American hobby drone market in 2020, according to a Bard College study.

DJI drones accounted for about 90% of the drones in its database utilized by US public safety agencies, including state and municipal police, as well as fire and emergency services.

For now, American consumers and even most federal and local agencies can still buy DJI drones, however, more restrictive regulations in the future could threaten the drone maker's position on the US market.

“One of the independent bases that we have for taking action at the FCC is the lack of candor, so separate and apart from any national security concern, if you lack candor that contributes to our assessment of whether you are qualified to get FCC authorizations or FCC licenses,” said Carr, the FCC commissioner.

Carr has requested that DJI be included on the FCC's Covered List, which prohibits firms from receiving federal Universal Service Fund (USF) subsidies for the repair of telecommunications infrastructure.

Since DJI is not a telecommunications provider the company is not directly eligible for subsidies and funding. However, the FCC proposed changes would prohibit equipment authorizations for companies that are on the covert list. This means that if the drone maker is added to the list DJI drones would not be able to legally operate on US communications infrastructure. Other Chinese telecommunication companies such as Huawei and ZTE are already on list.

President Biden signed the Secure Equipment Act into law in November, requiring the FCC to impose such sanctions on corporations on the Covered List by the end of the year. According to the Washington Post, FCC spokeswoman Paloma Perez would not provide comments directly related to the drone maker.

DJI's close relationship with Xinjiang's Public Security Department

Bloomberg News first reported in 2017 about the close ties between drone maker DJI and Xinjiang's Public Security Department.

Xinjiang police and other local authorities continue to acquire DJI drones as recent contracts discovered by research organization IPVM show.

IPVM showed the News outlet seven purchase orders for DJI products by separate Xinjiang police public security department since 2019. The combined orders had a total value of almost $300,000.

Examples of such orders are:

• $132,000 worth of DJI drones purchaed by the police in Xinjiang's Aksu region in December, 2021.
• $75,000 worth of DJI drones bought by the police in the northern Xinjiang region of Karamay in September, 2021.
• $47,000 worth of DJI drones for the Xinjiang Production and Construction Corps a state paramilitary organization that the US government included to a sanctions list for human rights violations in 2020.

The documents show that DJI drones and technology are continued to be used in the Xinjiang region where according to experts over one million ethnic Uyghurs have been detained in recent years.

DroneXL's take

The scrutiny of DJI has steadily increased in the United States over the last few years as we have reported here on DroneXL.

Today's news about the close ties between Chinese government agencies and DJI as reported by the Washington Post and IPVM will in all likelihood increase the political focus on the drone maker. We would not be surprised to see additional measures taken to limit the use of DJI drones by US government agencies.

A recent example of this is the recent ban on the use and acquisition of DJI drones by government agencies in Florida.

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