CATL's Hong Kong IPO: A Gamble on Geopolitics?

Contemporary Amperex Technology Co. (CATL), the world’s largest electric vehicle (EV) battery maker, is poised to list in Hong Kong in May 2025, aiming to raise at least $5 billion. The offering, which would mark Asia’s largest share sale since Kuaishou’s 2021 IPO, has ignited excitement—and alarm—among investors and advisers. While the funds are critical for CATL’s global expansion plans, including a €7.3 billion battery plant in Hungary, geopolitical risks loom large. Advisers warn that U.S.-China trade tensions, sanctions, and forced labor allegations could derail the deal, testing whether profit or principle will prevail in global finance.

The Geopolitical Minefield

The primary threat to the IPO stems from U.S. scrutiny of CATL’s ties to China’s military and human rights concerns. In January 2025, the U.S. Department of Defense added CATL to its list of companies “supporting China’s military modernization,” citing its role in supplying advanced lithium-ion batteries to Chinese submarines. This designation bars U.S. investors from holding CATL shares, creating reputational risks for underwriters JPMorgan Chase, Bank of America, CICC, and China Securities Financial.

The U.S. House Select Committee on China has amplified these risks, urging the two U.S. banks to withdraw from the deal. Committee Chairman John Moolenaar accused CATL of links to the Xinjiang Production and Construction Corps (XPCC), a U.S.-sanctioned paramilitary group accused of forced labor in its facilities. The House has warned that proceeding with the IPO could expose banks to legal penalties under the Uyghur Forced Labor Prevention Act (UFLPA) and investor backlash from ESG-focused funds.

Trade Risks Complicate the Picture

Beyond sanctions, U.S. tariffs and trade policies add layers of uncertainty. President Trump’s April 2025 tariff package, targeting solar panels and aluminum imports, sent Hong Kong’s Hang Seng Index tumbling 4.4% in April—though it remains up 10.14% year-to-date. For CATL, the stakes are existential: its A-share price has dropped 20% over the past year amid geopolitical jitters, and its Hungarian plant requires $7.5 billion in funding. If the Hong Kong offering fails, the project’s timeline could be jeopardized, undermining CATL’s goal of capturing 40% of the global EV battery market by 2030.

The Banks’ Dilemma: Fees vs. Fines

The underwriters face a stark choice: proceed and risk legal and reputational fallout, or withdraw and cede millions in underwriting fees. JPMorgan and Bank of America, which reported weak equity underwriting revenues ($324 million and $272 million, respectively, in Q1 2025), see CATL’s IPO as a rare opportunity. However, the House Committee’s April 17 letters accusing them of “due diligence failures” have raised the ante.

The reputational risks are formidable. ESG investors, including many U.S. pension funds, may boycott the offering if U.S. banks participate. Meanwhile, the U.S. Congress is advancing the China Military Companies Sanctions Act, which would penalize firms enabling listed entities. For underwriters, the calculus hinges on whether short-term gains outweigh long-term damage to their China-U.S. business.

Market Context: Hong Kong’s Resurgence

Hong Kong’s IPO market has rebounded in 2025, with $2.7 billion raised year-to-date—the strongest start since 2021. CATL’s listing aligns with this trend, but its success depends on investor confidence in navigating geopolitical risks. The city’s status as a global capital-raising hub is at stake: if CATL’s deal collapses, it could deter other Chinese firms from listing there, reinforcing concerns about Hong Kong’s vulnerability to U.S. sanctions.

Conclusion: A Litmus Test for Global Finance

CATL’s Hong Kong IPO is a microcosm of U.S.-China financial tensions. The $5 billion offering is not just about funding a battery plant—it’s a test of whether global banks will prioritize profit over compliance with U.S. sanctions or vice versa.

If JPMorgan and Bank of America proceed, they risk regulatory scrutiny and ESG investor flight. If they withdraw, CATL may struggle to secure the capital needed for its Hungarian project, potentially delaying its global expansion. Either way, the outcome will reverberate beyond this deal.

The data underscores the stakes:
- CATL’s A-share price has fallen 20% over the past year, reflecting investor wariness.
- The U.S. has detained $3 billion in electronics imports since 2022 under the UFLPA, with solar modules accounting for most of this.
- Hong Kong’s IPO market, while resurgent, remains exposed to geopolitical headwinds—its Hang Seng Index dropped 4.4% in April 2025 amid tariff threats.

Ultimately, CATL’s IPO will hinge on whether underwriters can mitigate reputational risks or if Washington’s pressure forces a retreat. The decision will shape not only CATL’s future but also the broader calculus of global finance in an era of U.S.-China rivalry. For now, the world’s largest battery maker is gambling that markets—and banks—will bet on its growth over its geopolitical baggage.