KUNSHAN, China—Five years ago, a group of Duke University scientists developed a pioneering gigapixel camera to provide long-range surveillance for the U.S. Navy through a sponsorship from the Pentagon.

The technology, never picked up by the U.S. government, is now being used by Chinese police to identify people from nearly a football field away, after lead Duke researcher David Brady moved to China in 2016 to kick-start his business.

China’s...