HONG KONG (Reuters) - Chinese artificial intelligence firm Megvii Technology Ltd plans to seek listing approval on Thursday for a Hong Kong IPO of at least $500 million, people with knowledge of the matter said, despite being blacklisted by the U.S. government.

FILE PHOTO: A panel outside the Hong Kong Exchanges displays top active securities during morning trading in Hong Kong, China October 11, 2018. REUTERS/Bobby Yip/File Photo

However, Beijing-based Megvii, which is backed by e-commerce giant Alibaba Group BABA.N and is widely known for its facial recognition platform Face++, has yet to decide whether to carry out a roadshow once approval is granted, one of the people said.

Sources had previously told Reuters the listing was scheduled for Hong Kong in the fourth quarter and might raise as much as $1 billion.

The latest move comes weeks after the U.S. government placed Megvii and seven other Chinese companies on a trade blacklist over their alleged involvement in human rights violations related to Beijing’s repression of Muslim minority populations in the Xinjiang Uighur Autonomous Region.

Goldman Sachs GS.N, which is a joint sponsor of the Megvii IPO alongside Citigroup and JPMorgan, said of its involvement last month that it was "evaluating in light of the recent developments".

Megvii last month said it “strongly objects” to being added to the blacklist and there were “no grounds” for the designation. In a statement, it said around 1% of revenues were derived from Xinjiang in 2018 and none in the six months ended June 30.

Megvii and the three banks declined to comment. But people close to the deal said that the listing approval would give the company and its sponsors some room for maneuver.

“Receiving the approval would give Megvii flexibility to launch the deal whenever it sees a window. But the deal itself could be a hard sell as many U.S. investors would probably shun it, as long as the company is on the blacklist,” one of the people said.

Hong Kong, which topped the global charts in 2018 for funds raised through IPOs, has been roiled by nearly six months of political crisis. But IPO activity in the city has picked up since September, marked by Budweiser Brewing Company APAC Ltd 1876.HK, which raised about $5 billion in Hong Kong's biggest IPO so far this year.

Alibaba last week also launched the share sale for its Hong Kong listing, aiming to raise up to $13.4 billion.

Megvii was founded in 2011 by Chief Executive Yin Qi and two friends from Tsinghua University. If the deal goes ahead it will become the first Chinese AI firm to go public.

The company provides AI technology to governments and companies including Alibaba, Ant Financial, Lenovo Group Ltd 0992.HK and Huawei.

In May a $750 million fundraising valued the company at slightly over $4 billion and attracted investors including Macquarie Group and the Abu Dhabi Investment Authority.