The U.S. Defense Department mentioned Monday it has added Chinese tech giants, together with gaming and social media conglomerate Tencent Holdings and battery maker CATL, to an inventory of companies it says work with China’s navy, additional increasing its listing of such entities.
The listing additionally included chip maker Changxin Memory Technologies, Quectel Wireless, drone maker Autel Robotics and China’s largest delivery firm COSCO Shipping Holdings, in keeping with a doc revealed on Monday.
Two entities owned by Chinese state-owned oil main China National Offshore Oil Corporation (CNOOC) had been additionally listed, CNOOC China Ltd. and CNOOC International Trading.
The yearly up to date listing of Chinese navy firms, formally mandated underneath U.S. legislation because the “Section 1260H list,” designated 134 firms, in keeping with a discover posted to the Federal Register.
While the designation doesn’t contain speedy bans, it may be a blow to the reputations of affected firms and represents a stark warning to U.S. entities and companies in regards to the dangers of conducting business with them. It might additionally add stress on the U.S. Treasury Department to sanction the businesses.
The Hong Kong-listed shares of Tencent fell as a lot as 7% in early commerce, whereas the U.S.-traded shares of the corporate, which can be the mum or dad of Chinese instantaneous messaging app WeChat, fell 8% in over-the-counter buying and selling.
Tencent mentioned in a press release that its inclusion on the listing was “clearly a mistake.” It added: “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business.”
CATL, the world’s largest electrical car battery maker whose Shenzhen-listed shares dropped greater than 5%, additionally known as the designation a mistake, saying it “is not engaged in any military-related activities.”
A Quectel spokesperson mentioned the corporate “does not work with the military in any country and will ask the Pentagon to reconsider its designation, which clearly has been made in error.” Quectel’s shares fell almost 7%.
COSCO’s HK-listed shares dropped greater than 4%.
The Chinese Embassy in Washington mentioned it opposed the transfer and urged the U.S. to right its “discriminatory practices,” including that China would safeguard the reputable rights and pursuits of its personal companies.
The different firms didn’t instantly reply to requests for remark.
Impact on firms
The up to date listing is certainly one of quite a few actions taken by Washington in recent times to spotlight and limit Chinese firms it says pose safety dangers, weighing on strained relations between the world’s two greatest economies.
In 2021, the U.S. Defense Department eliminated Xiaomi after the Chinese tech agency sued the U.S. authorities for together with it on the listing. A federal decide had known as the U.S. authorities’s course of to incorporate Xiaomi “deeply flawed.”
Morningstar senior fairness analyst Ivan Su mentioned he believed Tencent had a superb likelihood to safe exclusion by way of U.S. courts, like Xiaomi, however that its inclusion might lead to reputational injury.
Tencent’s U.S. earnings publicity was within the high-single-digit share vary, he added, principally made up of gaming income. “While this represents the maximum potential downside, we see it as highly unlikely that Tencent’s US gaming revenue will be affected over the near term.”
Jefferies mentioned in a analysis be aware the aim of the Chinese Military Companies (CMC) listing was to specific the opinion of the Defense Department which might function a reference for different authorities departments.
“The most serious consequence for CMC companies is a U.S. investment ban, but it’s all up to Trump and his team.”
Craig Singleton, a China knowledgeable on the Foundation for Defense of Democracies, mentioned the additions confirmed that it was “reckless” for American companies to conduct business with a rising swath of Chinese companies.
“The U.S. isn’t just safeguarding a handful of technologies anymore,” he mentioned. “The garden of sensitive technologies is growing, and the fence protecting them is being fortified.”
Other firms added embrace MGI Tech, which makes genomic sequencing devices, and Origincell Technology, which lawmakers have alleged operates a cell financial institution community and bio-storage applied sciences. Neither agency instantly responded to requests for feedback.
U.S. lawmakers had pushed the Pentagon all through 2024 so as to add a few of the firms, together with CATL, to the listing. Ford Motor is constructing a battery plant in Michigan and plans to license CATL know-how to provide low-cost lithium-iron batteries on the facility – a transfer that has sparked issues by some lawmakers. Ford didn’t instantly touch upon Monday.
Two beforehand listed firms, drone maker DJI and Lidar-maker Hesai Technologies, each sued the Pentagon final 12 months over their earlier designations, however stay on the up to date listing.
The Pentagon additionally eliminated six firms it mentioned not met the necessities for the designation, together with AI agency Beijing Megvii Technology, China Railway Construction Corporation Limited, China State Construction Group Co. and China Telecommunications Corporation.
Source: www.dailysabah.com