Tencent shares plunge after US adds company to Chinese military blacklist

NEW YORK - The United States has blacklisted Tencent Holdings and Contemporary Amperex Technology Co Ltd (CATL) 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 President-elect Donald Trump takes office.

CATL, a major supplier to Tesla, joined Tencent on a federal register of entities deemed to have ties with the People’s Liberation Army (PLA). Both companies protested, saying their inclusion was a mistake and that they have no ties with the military.

Tencent’s stock slid more than 7 per cent in Hong Kong, notching its biggest drop since October. CATL’s shares fell about 3 per cent.

The blacklisting threatens to further 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 vehicle makers, from Stellantis to Volkswagen. Its inclusion threatens to disrupt that ecosystem just as the US and EU are sounding the alarm about China’s growing dominance in a key industrial sector.

The Pentagon also named SenseTime Group and Changxin Memory Technologies, singling out a Chinese maker of memory chips considered crucial to Beijing’s semiconductor and AI development endeavours. And the agency added oil major CNOOC and Cosco Shipping Holdings, both of which had been previously targeted by Washington. Cosco shares fell as much as 4.4 per cent in Hong Kong, while CNOOC was down as much as 1.6 per cent.

“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 to Activision Blizzard. 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 Mr Elon Musk has held up as a model for his social media platform X.

During the first Trump administration, the US government sought to ban Tencent’s WeChat – a messaging service that has evolved into a payment, social media and online services platform – on grounds that it jeopardised 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 defence industrial base.

It is 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 – Trump’s nominee to be secretary of state – asked the Pentagon to target CATL because of its potential to become a vital supplier to the PLA.

On Jan 7, 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. Several US companies, including Ford Motor, source from it. But a global scale-back on making electric cars and 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.

The Chinese firm said it was “a mistake” to include its name on the Defence Department list. It said in a statement that it is not engaged in military-related activities, was privately founded and became a publicly listed company in 2018. 

A Tencent spokesperson said that “we are not a military company or supplier”, adding: “Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defence to address any misunderstanding.”

Some Chinese firms have successfully fought to be removed from the US list. In 2021, smartphone giant Xiaomi managed to reach an agreement with the US government that set aside its designation as a Chinese military company. In 2024, Advanced Micro-Fabrication Equipment was removed, doing away with a label the firm had 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 before grappling with a severe domestic economic downturn. The social media and entertainment leader has, however, fared better than its rivals – in part because of its line-up of games and growth in its fintech division. Its Hong Kong-listed stock gained more than 42 per cent in 2024.

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 Defence 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 artificial intelligence firm Beijing Megvii Technology, China Marine Information Electronics, China Railway Construction, China State Construction Group, China Telecommunications Corp and Shenzhen Consys Science & Technology. BLOOMBERG