US targets Tencent, CATL over alleged Chinese military ties

The United States has added several prominent Chinese technology companies, including gaming and social media giant Tencent and battery maker CATL, to its list of entities it claims are linked to China’s military.

This move serves as a stern warning to American businesses about the potential risks of working with these companies. While inclusion on the list doesn’t automatically result in sanctions, it exerts significant pressure on the US Treasury Department to take action, further escalating tensions between the world’s two largest economies.

Tencent, which owns the messaging app WeChat, has strongly denied any military affiliations, calling the listing a “mistake.” A spokesperson for the company told the BBC, “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business.” The company also emphasized its commitment to technological development in the gaming and social media industries, adding, “Our focus remains on innovation, not military ties.”

Similarly, CATL, one of the world’s largest electric vehicle battery manufacturers, rejected the US government’s claims, insisting it “is not engaged in any military-related activities.” The company’s spokesperson said, “This is an attempt to suppress Chinese companies for political reasons and undermines fair market competition.” Liu Pengyu, a spokesperson for the Chinese embassy in Washington, voiced strong opposition, stating, “The US’s practices violate the market competition principles and international economic and trade rules it has long championed.”

The US Department of Defense’s Section 1260H list, which is updated annually, now includes 134 companies. This list forms part of Washington’s broader strategy to curb Beijing’s growing military influence, which it believes is facilitated by Chinese firms. “This is about national security,” explained a US government official, who wished to remain anonymous. “The Chinese military’s collaboration with private companies creates risks for global stability.”

Pressure from US lawmakers had been mounting on the Pentagon to include firms like CATL, particularly as American car giant Ford announced plans to invest $2 billion in a Michigan battery plant, with intentions to license technology from CATL. “We understand the concerns, but our investment is about green energy, not military technology,” said Ford CEO Jim Farley in a statement. However, the company has yet to comment on the Pentagon’s decision.

The inclusion of these companies in the list also follows ongoing legal battles. Last year, Chinese drone maker DJI and Lidar manufacturer Hesai Technologies sued the Pentagon over their inclusion, but both remain on the updated list. As for the latest companies named, analyst Emily Zhang said, “This will only intensify the ongoing tech war between the US and China, with broader implications for global business.”

After the announcement, Tencent’s stock dropped by around 7% in Hong Kong, while CATL’s shares fell by approximately 4%. The financial market reaction indicates how seriously investors are taking the growing geopolitical tensions. The situation could escalate further as President-elect Donald Trump, known for his hardline stance on China, prepares to return to the White House this month.