US Adds Tencent, Tesla Supplier CATL To 'Chinese Military' Blacklist, Shares Tumble
Tuesday, Jan 7, 2025 5:02 am ET
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The U.S. Department of Defense (DoD) has added Chinese tech giant Tencent Holdings Ltd. and electric vehicle (EV) battery maker Contemporary Amperex Technology Co. Ltd. (CATL) to its list of "Chinese military companies" operating in the U.S. The move, announced on Monday, has sent shares of both companies tumbling in Hong Kong and U.S. trading.
Tencent, one of the most valuable tech companies in China, saw its Hong Kong-listed stock drop nearly 8% on Tuesday, making it the top decliner on the city's benchmark Hang Seng Index. CATL, the world's largest battery maker, also fell, with its shares in Shenzhen losing 2.6% of their value.
The DoD's list, which now includes 134 companies, is an important effort to highlight and counter China's Military-Civil Fusion strategy, which supports the modernization goals of the People's Liberation Army (PLA) by ensuring it can acquire advanced technologies and expertise developed by civilian entities. Being placed on the list does not impose immediate legal or economic restrictions, but it could pressure the U.S. Treasury Department to impose restrictions and trigger the U.S. Commerce Department's Bureau of Industry and Security (BIS) to add a listed company to its Entity List, blocking access to American technologies.
Tencent and CATL have both denied any connections with China's military, calling their inclusion on the U.S. list a "mistake." A CATL spokesperson said the company isn't engaged in any military-related activities, while Tencent said it was neither a military company nor a supplier. Analysts, however, believe that the inclusion on the list may pose only a short-term drag on shares, as companies have successfully lobbied to be removed from the list in the past.

Tencent's gaming and fintech divisions have driven its growth despite China's domestic consumption slowdown, with its Hong Kong-listed stock gaining over 42% in 2024. CATL, meanwhile, has a strong position in the EV market, with its products appearing in EVs from Tesla, Ford, Volkswagen, BMW, and more. Despite the political headwinds, both companies' core businesses remain robust and have long-term growth potential.
The U.S. government's actions could significantly impact the global supply chain and competition in the tech and EV industries. Tencent and CATL have extensive global partnerships, and their inclusion on the list may discourage U.S. customers from purchasing their products, potentially disrupting supply chains and creating opportunities for competitors. For instance, CATL's designation could encourage U.S. EV manufacturers to source batteries from alternative suppliers like LG Chem or Panasonic, intensifying competition in the EV battery market.
The outcome of the U.S. elections in 2024 could also influence the future of the blacklist and the investment landscape for Chinese companies. If a new administration takes a more conciliatory approach towards China, it may review and potentially reduce the number of companies on the blacklist, as seen with the removal of Xiaomi and Advanced Micro-Fabrication Equipment Inc. from the list. This could lead to a more favorable investment climate for Chinese companies, as demonstrated by the market's resilience across varying leadership.
Investors can balance the potential risks and rewards of investing in companies like Tencent and CATL by considering their strong fundamentals and the geopolitical tensions. Diversifying portfolios, monitoring geopolitical developments, and engaging with the companies to understand their responses to the listings can help mitigate risks. By staying informed and engaged, investors can make more informed decisions about their investments in these companies.