Michael Martina, David Shepardson and Karen Freifeld
WASHINGTON/NEW YORK (Reuters) – The U.S. Defense Department said on Monday it had added Chinese tech giants including gaming and social media leader Tencent Holdings (OTC:) and battery maker CATL to a list of firms it According to him, they are working with the Chinese army.
The list also included chip maker Changxin Memory Technologies, Quectel Wireless, drone maker Autel Robotics and China’s largest shipping company COSCO Shipping Holdings, according to the document released Monday.
The listing also included two companies owned by China’s state-owned oil company China National Offshore Oil Corporation: CNOOC (NYSE:) China Ltd and CNOOC International Trading.
According to a notice posted in the Federal Register, there are 134 companies listed on the annually updated list of Chinese military companies designated under U.S. law as the “Section 1260H List.”
While this designation does not imply immediate bans, it could damage the reputations of affected companies and sends a stark warning to U.S. organizations and firms about the risks of doing business with them. It could also increase pressure on the US Treasury to impose sanctions on the companies.
Tencent’s Hong Kong-listed shares fell 7% in early trading, while U.S.-listed shares of the company, which is also the parent of Chinese instant messaging app WeChat, fell 8% in over-the-counter trading. .
Tencent said in a statement that its inclusion on the list was a “clear mistake.” It added: “We are not a military company or supplier. Unlike sanctions or export controls, this listing does not impact our business.”
CATL, the world’s largest electric vehicle battery maker whose shares fell more than 5% on the Shenzhen stock exchange, also called the designation a mistake, saying it “does not engage in any military activities.”
A Quectel spokesman said the company “does not cooperate with the military in any country and will ask the Pentagon to reconsider its designation, which was clearly made in error.” Quectel shares fell almost 7%.
Hong Kong-listed shares of COSCO fell more than 4%.
The other companies and the Chinese Embassy in Washington did not immediately respond to requests for comment.
IMPACT ON COMPANIES
The updated list is one of numerous actions Washington has taken in recent years to identify and restrict Chinese companies it deems pose security risks, worsening tense relations between the world’s two largest economies.
Jeffries said in a research note that the purpose of the list of Chinese military companies (CMC) was to express the views of the Department of Defense, which could serve as a guide for other government departments.
“The most serious consequence for CMC companies is a ban on investment in the US, but everything depends on Trump and his team.”
Craig Singleton, a China expert at the Foundation for Defense of Democracies, said the additions show it was “reckless” for U.S. firms to do business with a growing number of Chinese corporations.
“The US is no longer just guarding a handful of technologies,” he said. “The garden of sensitive technologies is growing, and the fence protecting them is strengthening. Today’s list makes it clear that these are not just for-profit companies. They are important players in China’s military modernization, directly fueling Beijing’s strategic ambitions.”
Other companies added include MGI Tech, which makes genomic sequencing tools, and Origincell Technology, which lawmakers say operates a network of cell banks and biostorage technologies. Neither firm immediately responded to requests for comment.
US lawmakers have been pushing the Pentagon throughout 2024 to add some companies, including CATL, to the list. Ford Motor (NYSE:) is building a battery plant in Michigan and plans to license CATL technology to produce low-cost lithium-iron batteries at the facility, a move that has raised concerns among some lawmakers. Ford did not immediately comment Monday.
Two previously listed companies, drone maker DJI and lidar maker Hesai Technologies, sued the Pentagon last year over their previous listings but remained on the updated list.
The Pentagon also delisted six companies it said no longer qualified for the list, including artificial intelligence company Beijing Megvii Technology, China Railway Construction Corporation Limited, China State Construction Group Co and China Telecommunications Corporation .