(Bloomberg) -- The US has blacklisted Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Ltd. for alleged links to the Chinese military, targeting the world’s biggest gaming publisher and top electric-vehicle battery maker in a surprise move weeks before Donald Trump takes office.
CATL, a major supplier to Tesla Inc., joined Tencent on a Federal Register of entities deemed to have ties with the People’s Liberation Army. Both companies protested their inclusion as a mistake, saying they have no ties with the military. Tencent’s stock slid more than 7% in Hong Kong, notching its biggest drop since October. CATL’s shares fell about 3%.
The blacklisting threatens to escalate tensions between the world’s two largest economies. While the Pentagon’s blacklist carries no specific sanctions, it discourages US firms from dealing with its members. CATL supplies not just Tesla but also many of the world’s biggest automakers, from Stellantis NV to Volkswagen AG. Its inclusion may disrupt that ecosystem just as Washington and Brussels are sounding the alarm about China’s growing dominance in a key industrial sector.
The Pentagon also named SenseTime Group Inc. and Changxin Memory Technologies Inc., singling out a Chinese maker of memory chips considered crucial to Beijing’s semiconductor and AI development endeavors. And the agency added oil major Cnooc Ltd. and Cosco Shipping Holdings Co., both of which have been previously targeted by Washington. Cosco shares fell as much as 4.4% in Hong Kong, while Cnooc was down as much as 1.6%.
“While we understand the market’s panic reaction, we also believe the inclusion in the list does not necessarily suggest that there is sufficient evidence to confirm the decision was the correct one,” Citigroup analyst Alicia Yap wrote.
Tencent, China’s most valuable company, has big investments in or deep ties to developers from Fortnite studio Epic Games Inc. to Activision Blizzard Inc. The company founded by billionaire Pony Ma is considered one of the pioneers of the internet and private sector in China, creating a so-called everything app that Elon Musk has held up as a model for X.
During the first Trump administration, the US government sought to ban WeChat — a messaging service that’s evolved into a payment, social media and online services platform — on grounds that it jeopardized national security.
The Pentagon’s blacklist is designed to surface companies that are either controlled by China’s military or serve to further the so-called civil-military complex, or the fusion of PLA and business interests to bolster the nation’s defense industrial base.
It’s unclear whether either company deals regularly with the PLA. Beyond direct ties to the government, US officials have pointed to laws that require Chinese companies to share information with Beijing on matters deemed relevant to national security.
In August, lawmaker Marco Rubio — nominated to become US secretary of state in the Trump administration — asked the Pentagon to target CATL because of its potential to become a vital supplier to the PLA.
On Tuesday, China’s Foreign Ministry again condemned US sanctions and vowed to defend its companies’ rights. “We urge the US to immediately correct its wrongdoings and end the illegal unilateral sanctions and long-arm jurisdiction on Chinese companies,” ministry spokesman Guo Jiakun told a regular press briefing in Beijing.
CATL accounted for over one-third of global battery shipments in the third quarter of 2024, according to Seoul-based SNE Research, more than double that of runner-up BYD Co. Several US companies, including Ford Motor Co., source from the Chinese firm. However, a global scale-back on making electric cars, as well as tariff tensions, pose a threat to CATL’s operations. Ford has begun cutting orders from battery suppliers, while CATL is exploring ways to avoid tariffs by licensing its technologies to the likes of Ford and General Motors Co.
The Chinese firm said it was “a mistake” to include its name on the Defense Department list. It said in a statement that it’s not engaged in military-related activities, was privately founded and became a publicly listed company in 2018.
‘No Impact’
“We are not a military company or supplier,” a Tencent spokesperson said. “Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding.”
Some Chinese firms have successfully fought to get removed from the US list. In 2021, smartphone giant Xiaomi Corp. managed to reach an agreement with the US government that set aside its designation as a Chinese military company. Last year, Advanced Micro-Fabrication Equipment Inc. was removed, doing away with a label the firm described as an “irrational” designation.
The move against Tencent follows a difficult few years for Chinese tech companies, which first weathered a blistering Beijing-led crackdown on the internet before grappling with a severe domestic economic downturn. The social media and entertainment leader has, however, fared better than rivals — in part because of its lineup of games and growth in its fintech division. Its Hong Kong-listed stock gained more than 42% last year.
The Chinese military company list stems from an order signed by Trump in late 2020 that barred American investment in Chinese firms owned or controlled by the military. It was part of a broader effort to rein in what the US had described as Beijing’s abusive business practices.
The Defense Department noted in the Federal Register filing that companies included on the list are entitled to request reconsideration.
In the same statement, the department removed several firms from the list, including AI firm Beijing Megvii Technology Co., China Marine Information Electronics Co., China Railway Construction Corp., China State Construction Group Co., China Telecommunications Corp. and ShenZhen Consys Science & Technology Co.
--With assistance from Colum Murphy, Katrina Nicholas, Yiqin Shen, Philip Glamann, Weilun Soon, Yongchang Chin, Andrew Pollack, Nick Turner, Debby Wu, Danny Lee, Jessica Sui and Shadab Nazmi.
(Updates with China’s response in the 11th paragraph. A previous story corrected “Pentagon” spelling.)
