Chinese artificial intelligence (AI) company Megvii's plans for a 500 million to one billion U.S. dollars initial public offering (IPO) in Hong Kong are back on track after its application was cleared by the city's stock exchange, two sources with direct knowledge of the matter said.

Megvii raised 750 million U.S. dollars in May 2019, and was valued at slightly over 4 billion U.S. dollars. Known for its facial recognition platform Face++, the company is aiming to be the first Chinese AI firm to go public.

Megvii filed its listing application on August 25 and under the Hong Kong Stock Exchange rules had six months to list from this date. It can also apply for a three month extension once this deadline has passed, according to stock exchange rules.

The U.S. Commerce Department put Megvii on an "Entity List" in October, and the company was asked to provide more information when facing the Hong Kong Stock Exchange listing committee to seek the go-ahead for the transaction.

Being placed on the blacklist bars Megvii from doing business with U.S. companies without applying for additional licenses. But approval has been difficult to obtain. The move followed the same blueprint as the blacklist of China's tech giant Huawei Technologies.

Megvii said at the time it that "strongly objected" the blacklisting.

Read more: Half of world's top AI unicorns come from China

Megvii is due to file updated listing information shortly with the Hong Kong exchange, according to sources who declined to be named because the information has not been made public.

Megvii was founded in 2011 by Chief Executive Yin Qi and two friends from Tsinghua University. The company provides AI technology to governments and companies including Alibaba, Ant Financial and Huawei.

The company has attracted investors including Australian investment bank Macquarie Group and the Abu Dhabi Investment Authority.

(With input from Reuters)