CATL's Hong Kong Listing Under Fire: U.S. Banks Face Ethical and Regulatory Crossroads

The U.S. House Select Committee on the Chinese Communist Party has escalated tensions in global finance by urging two major U.S. banks—Bank of America and JPMorgan Chase—to withdraw from their roles as underwriters for Contemporary Amperex Technology Co. (CATL)’s upcoming $5 billion Hong Kong IPO. The move, led by Committee Chairman John Moolenaar, underscores a growing political and regulatory crackdown on Chinese firms with alleged military or human rights ties, raising critical questions for investors about risk exposure and ethical investing.

The Case Against CATL

CATL, a leading supplier of electric vehicle (EV) batteries, has drawn scrutiny for its dual-use technologies and connections to Chinese state entities. The Department of Defense (DoD) labeled CATL a “Chinese military company” under Section 1260H of the National Defense Authorization Act, citing its provision of advanced lithium-ion batteries to modernize China’s submarine fleet. The House committee further highlighted ties to the Xinjiang Production and Construction Corps (XPCC), a paramilitary group sanctioned by the U.S. for its role in forced labor and Uyghur persecution.

The committee’s April 17 letters to Bank of America CEO Brian Moynihan and JPMorgan’s Jamie Dimon warned that underwriting the IPO could expose the banks and their clients to “significant regulatory, financial, and reputational risks.” These include potential violations of the U.S. sanctions regime and complicity in supporting China’s military and surveillance projects.

The Banks’ Dilemma: Profits vs. Principles

Both banks face a stark choice: prioritize short-term underwriting fees in a lackluster market or heed warnings that could protect their reputations and compliance standings. JPMorgan and Bank of America reported weak equity underwriting performance in Q1 2025, with fees totaling $324 million and $272 million, respectively—both below analyst expectations. The CATL IPO, which could generate millions in underwriting revenue, represents a rare high-profile opportunity in a sluggish sector.

Yet the risks are mounting. The DoD’s designation of CATL under Section 1260H bars U.S. investment in companies directly supporting China’s military modernization. Even without explicit legal prohibitions, reputational harm looms large. Investors, particularly those with ESG mandates, may shun the IPO if U.S. banks remain involved, while regulators could scrutinize the banks’ due diligence processes.

Investor Implications: Navigating a Minefield

For investors, the CATL listing presents a paradox. The company’s dominance in EV batteries and partnerships with automakers like Tesla and BMW suggest long-term growth potential. However, its ties to sanctioned entities and military projects create material risks.

The $5 billion IPO valuation assumes seamless access to global capital markets, but if U.S. banks withdraw, the deal’s success could falter. Moreover, Congress’s aggressive stance—exemplified by the Select Committee’s intervention—hints at broader legislative action. The House recently passed the China Military Companies Sanctions Act, which would impose penalties on U.S. firms enabling such entities.

CATL’s stock performance in China has been volatile, with its A-share listing down 20% over the past year amid geopolitical headwinds.

Broader Geopolitical Tensions

This dispute reflects a structural shift in U.S.-China economic ties. Washington is increasingly weaponizing financial regulation to curb Chinese firms’ access to Western capital, particularly in sectors with dual-use applications. The Select Committee’s focus on CATL signals that no industry—be it EVs, semiconductors, or AI—is immune to scrutiny over national security or human rights concerns.

Conclusion: A Crossroads for U.S. Finance

The CATL controversy forces banks and investors to confront uncomfortable truths. For the banks, the choice is clear: accept the reputational blow of underwriting a firm with military ties, or cede fees to less risk-averse competitors. For investors, the calculus involves weighing CATL’s technological leadership against escalating geopolitical and ethical risks.

The data is unequivocal: U.S. underwriters face a $5 billion gamble in a politically charged environment. With Congress and regulators amplifying pressure, the stakes extend beyond this single deal. The outcome will set a precedent for how global finance navigates the intersection of profit and principle in an era of U.S.-China rivalry.

As the Select Committee’s warnings make clear, the cost of complicity—including legal penalties, investor backlash, and reputational damage—could far outweigh fleeting underwriting gains. For now, the world watches to see whether profit or principle will prevail.