US Blacklists Tencent and CATL for Alleged Military Ties

The US has blacklisted Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Ltd. (CATL) for alleged links to the Chinese military, Bloomberg reports. This move, weeks before Donald Trump takes office, targets the world's largest gaming publisher and top electric-vehicle battery maker.

CATL, a major supplier to Tesla Inc., joins Tencent on the Federal Register's list of entities deemed to have ties to the People's Liberation Army (PLA). Both companies have protested their inclusion, claiming no military connections. Tencent's stock plunged more than 7% in Hong Kong, while CATL's shares fell over 5%, marking their biggest single-day drops in months.

The blacklisting could escalate tensions between the US and China. While the Pentagon's blacklist doesn't carry specific sanctions, it discourages American companies from doing business with those listed. This could disrupt CATL's supply chain, given its role as a major battery supplier not just to Tesla but also to numerous global automakers like Stellantis NV and Volkswagen AG.

The Pentagon also added SenseTime Group Inc. and Changxin Memory Technologies Inc. to the list. SenseTime, a Chinese AI firm, is considered vital to Beijing's semiconductor and AI development. The agency also added oil major Cnooc Ltd. and Cosco Shipping Holdings Co., both of which have previously been targeted by Washington.

"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," wrote Citigroup analyst Alicia Yap.

Tencent, China's most valuable company, has significant investments in or close ties to major tech firms like Epic Games Inc. and Activision Blizzard Inc. The company, founded by billionaire Pony Ma, is considered a pioneer of China's internet and private sector, creating an "everything app" that Elon Musk has praised.

The Defense Department noted in its Federal Register filing that companies on the list can request reconsideration. The department also 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.

"We are not a military company or supplier," said a Tencent spokesperson. "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."

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 curb what the US described as Beijing's abusive business practices.