Wall Street support of China's surveillance PART 2

From: <reginal..._at_hotmail.com>
Date: Tue, 11 Sep 2007 10:42:39 -0700

Part 2 of 3 Parts

"The Chinese government trade association for surveillance companies,
which also regulates the industry, predicts that the surveillance
market here will expand to more than $43.1 billion by 2010, compared
with less than $500 million in 2003. Under the Safe Cities program
adopted by the Chinese government last winter, 660 cities are starting
to work on high-tech surveillance systems.

Many Western experts, skeptical that China faces a terrorism threat,
have suggested that the government may be using it as an excuse for
tougher policies toward ethnic minorities in western China, notably
Xinjiang Province, and toward Tibet.

Terence Yap, the vice chairman and chief financial officer of China
Security and Surveillance Technology, says his company's software
made it possible for security cameras to count the number of people in
crosswalks and alert the police if a crowd forms at an unusual hour, a
possible sign of unsanctioned protest.

Mr. Yap said terrorism concerns did exist. His company has outfitted
rail stations and government buildings in Tibet with surveillance
systems

Mr. Yap and Lin Jiang Huai, the chairman and chief executive of China
Public Security, said that their companies did not do business with
the Chinese military and should not raise concerns in the United
States. They also said their businesses used technology developed in
China and were therefore not subject to United States export controls.

China Security and Surveillance has been aggressively raising money in
the United States, including $110 million in convertable loans so far
this year from the Citadel Group, a big hedge fund in Chicago. In the
last 18 months, the company has used the money to acquire or make a
deal to buy 10 of the 50 largest surveillance companies in China.

James Mulvenon, the director of the Center for Intelligence Research
and Analysis, which does classified analysis of foreign military and
intelligence programs for the Pentagon and other government agencies,
said that Beijing clearly wanted the company to consolidate the
industry.

'They're really sort of the Ministry of Public Security's national
champion.' Mr. Mulvenon said of China Security and Surveillance. 'In
terms of the gear and building the surveillance society, they are the
ones.'

After the company announced sharply higher sales and profit on Aug.
13, a succession of American hedge fund managers and investment bank
analysts took turns on a conference call questioning and
congratulating Mr. Yap.

Traded on the over-the-counter bulletin board market while waiting for
the beginning of trading on the New York Stock Exchange, the company
has raised almost all of its money through the Cidatel loans and
private placements of stock with 17 institutional investors in the
United States, including the Pinnacle Fund and Pinnacle China Fund in
Plano, Texas, and JLF, a hedge fund based in Del Mar, California.

The Pinnacle Funds' investments have risen six-fold in 17 months. The
funds, which raise all their money in the United States, are also the
main investors in China Public Security Technology, with a stake that
has nearly tripled in value since February.

Barry Kitt, the founder and general partner of the funds, declined to
comment. Citadel and JLF officials also declined to comment.

Each time China Security and Surveillance makes an acquisition, it
holds an elaborate banquet, with dancers. The majority of the 500 or
more people invited are municipal and provincial security officials,
as well as executives of rival companies that may become acquisition
targets.

'When they come, they hear central government officials endorsing us,
they hear bankers endorsing us or supporting us, it gives us
credibility,' Mr. Yap said. 'It's a lot of drinking, it's like a
wedding banquet.'

Lehman Brothers bankers and various Ministry of Public Security
officials have spoken at such events, which have been held all over
the country. One was at the Great Hall of the People in Beijing, where
Mr. Li himself - of Project Golden Shield - addressed the crowd.

China Security and Surveillance has headquarters in Shenzhen, a high-
tech manufacturing center in southeastern China, but two years ago it
purchased a 'shell' Delaware company with no operations but a listing
on the American over-the-counter bulletin board market. It turned the
Delaware company into its corporate parent.

China Public Security, also with headquarters in Shenzhen,
incorporated in Florida in the same way to obtain a listing on the
over-the-counter bulletin board.

............."

End of Part 2 of 3 Parts

Reg Curtis/VE9RWC
Received on Sat Mar 02 2024 - 00:57:18 CST