National Security Concerns Threaten CATL’s $5 Billion Hong Kong IPO

The U.S. House Select Committee on China, led by Chairman John Moolenaar, has escalated tensions over China’s technological ambitions by demanding that JPMorgan Chase and Bank of America withdraw from their roles as underwriters for Contemporary Amperex Technology Co. (CATL)’s $5 billion Hong Kong IPO. The April 17, 2025, letters to JPMorgan CEO Jamie Dimon and Bank of America CEO Brian Moynihan cite CATL’s designation by the Pentagon as a “Chinese military company” under Section 1260H of the National Defense Authorization Act. This move underscores a growing bipartisan push to curb U.S. financial ties to Chinese firms perceived as threats to national security and human rights.

The National Security Case Against CATL

The Department of Defense’s classification of CATL stems from its alleged ties to China’s military modernization. According to the House Committee, CATL supplies advanced lithium-ion batteries for China’s submarine fleet, directly supporting naval capabilities. Additionally, the company’s links to the Xinjiang Production and Construction Corps (XPCC)—a U.S.-sanctioned paramilitary entity implicated in forced labor camps targeting Uyghur Muslims—have drawn scrutiny. The Committee warns that underwriting the IPO would risk complicity in “underwriting genocide” and enabling Beijing’s military buildup.

CATL denies these allegations, stating it operates independently and complies with international regulations. However, the Pentagon’s designation has already triggered regulatory reviews. The House Committee’s letters demand detailed responses from the banks on their risk assessments, compliance protocols, and potential legal violations.

CATL’s shares have fluctuated amid geopolitical headwinds, falling 12% year-to-date as of April 2025. While its valuation remains robust due to its dominant 38% global EV battery market share, the IPO’s success hinges on resolving these national security concerns.

The Banks’ Dilemma: Profits vs. Patriotism

JPMorgan and Bank of America face a high-stakes decision. The Hong Kong IPO, projected to be the largest listing since Kuaishou’s $6.2 billion offering in 2021, could generate fees of $200–300 million. Yet their involvement risks regulatory penalties, reputational damage, and investor backlash.

The House Committee’s letters emphasize “due diligence failures,” noting the banks’ “aggressive pursuit” of the deal despite CATL’s Pentagon blacklist status. Both banks’ equity underwriting revenues have declined year-over-year, with JPM at $324 million and BAC at $272 million in Q1 2025. Proceeding with the CATL IPO could further strain investor confidence amid heightened regulatory scrutiny.

Broader Geopolitical Implications

The CATL IPO has become a flashpoint in U.S.-China tech competition. China’s near-total dominance of rare earth minerals—critical for batteries, missiles, and semiconductors—threatens U.S. technological and military autonomy. CATL’s control over 90% of global rare earth processing and its partnerships with automakers like Ford raise fears that U.S. tax subsidies may indirectly fund Chinese military modernization.

The House Committee’s intervention follows a pattern of actions targeting Chinese entities. In 2024, it labeled AI firm DeepSeek a “profound threat,” urging U.S. regulators to block its access to American data. Similarly, CATL’s inclusion in the Pentagon’s blacklist signals a broader strategy to counter Beijing’s “golden share” system, which grants the CCP disproportionate corporate control via minimal equity stakes.

Conclusion: A High-Risk Gamble for All Involved

The CATL IPO faces existential risks. If JPMorgan and Bank of America withdraw, the deal could collapse, depriving CATL of critical capital for global expansion and denting Hong Kong’s competitiveness as a listing venue. If they proceed, they risk fines, reputational harm, and congressional investigations.

For investors, the stakes are clear: CATL’s valuation depends on resolving national security concerns. With the U.S. Congress and DoD amplifying pressure, the likelihood of a regulatory compromise is low. Meanwhile, the broader tech sector faces a reckoning. These have declined by 40% since 2020, reflecting investor wariness of geopolitical risks.

In the end, the CATL IPO is not just about capital markets—it’s a test of whether U.S. financial institutions can balance profit motives with national security imperatives in an increasingly zero-sum tech rivalry. The outcome will shape the trajectory of U.S.-China economic relations for years to come.