Chinese tech giant Alibaba has sought to distance itself from a facial recognition software feature devised by its cloud computing unit that could help users to identify members of the country's Muslim Uighur minority.
The issue is highly controversial – and risky – because the Trump Administration has been imposing US sanctions on companies for any alleged collusion with Chinese security officials that would link them to mistreatment of the Uighurs in Xinjiang.
Rights groups say as many as one million Uighurs and other mostly Muslim minorities have been held in internment camps there.
Beijing initially denied the camps' existence but now calls them vocational training centres aimed at offering alternatives to religious extremism.
China's Uighurs, a Muslim people of Turkic origin, have for decades resented Chinese control, and that anger that has periodically exploded into deadly violence.
Surveillance in Xinjiang has risen sharply in recent years, with facial recognition and other technologies deployed across the province.
Washington last year blacklisted eight Chinese tech firms for alleged links to the surveillance effort, as global criticism grows over Beijing's policies in the northwest region.
And this week a report revealed that Alibaba, one of the world's most valuable companies, was the latest Chinese corporate embroiled in the Uighur controversy.
In a statement posted online late on Thursday, Alibaba said it was "dismayed to learn" that Alibaba Cloud developed the feature.
The technology was used only in for capability-testing and not deployed by any customer, Alibaba said, adding that it had "eliminated any ethnic tag" in its products.
"We do not and will not permit our technology to be used to target or identify specific ethnic groups," it said.
US-based surveillance research firm IPVM said Chinese telecoms company Huawei had been involved in testing facial-recognition software that could send alerts to police when Uighur faces were recognised.
Huawei denied the claim. But the controversy caused Barcelona's World Cup-winning French football star Antoine Griezmann to sever an endorsement deal with Huawei.
Alibaba is the leader in China's huge e-commerce sector, projecting a sunny image to the world epitomised by globe-trotting founder and billionaire former chairman Jack Ma. It has also moved into cloud computing, bricks-and-mortar retail and delivery services, as well as an overseas expansion.
The question now is whether the Trump administration may want to act against the tech giant. Alibaba is listed on both the New York and Hong Kong stock exchanges. It is the biggest cloud computing vendor in China and the fourth worldwide, according to data from researcher Canalys.
Earlier this month, US lawmakers sent letters to Intel Corp and Nvidia Corp following reports of their computer chips being used in the surveillance of Uighurs.
With reporting by AFP