US provides Tencent, CATL to listing of Chinese language companies allegedly aiding Beijing’s navy By Reuters

By Michael Martina, David Shepardson and Karen Freifeld

WASHINGTON/NEW YORK (Reuters) -The U.S. Safety Division said on Monday it has added Chinese language language tech giants along with gaming and social media chief Tencent Holdings (OTC:) and battery maker CATL to a list of firms it says work with China’s navy. 

The itemizing moreover included chip maker Changxin Memory Utilized sciences, Quectel Wi-fi and drone maker Autel Robotics, in response to a doc printed on Monday.

The yearly updated itemizing of Chinese language language navy firms, formally mandated beneath U.S. laws as a result of the “Half 1260H itemizing,” designated 134 firms, in response to a uncover posted to the Federal Register.

The Hong Kong-listed shares of Tencent fell as quite a bit as 7% in early commerce, whereas the U.S.-traded shares of the company, which may also be the dad or mum of Chinese language language on the spot messaging app WeChat, fell 8% in over-the-counter shopping for and promoting.

Tencent said in an announcement that its inclusion on the itemizing was “clearly a mistake.” It added: “We aren’t a navy agency or supplier. In distinction to sanctions or export controls, this itemizing has no impression on our enterprise.”

CATL, the world’s largest electrical automotive battery maker whose Shenzhen-listed shares dropped larger than 5%, moreover known as the designation a mistake, saying it “shouldn’t be engaged in any navy related actions.”

A Quectel spokesperson said the company “doesn’t work with the navy in any nation and may ask the Pentagon to rethink its designation, which clearly has been made in error.” Quectel’s shares fell virtually 7%.

The other firms and the Chinese language language embassy in Washington didn’t immediately reply to requests for comment.

IMPACT ON COMPANIES

The updated itemizing is one amongst fairly a couple of actions taken by Washington recently to highlight and restrict Chinese language language firms it says pose security risks, weighing on strained relations between the world’s two best economies.

Jefferies said in a evaluation observe the goal of the Chinese language language Military Corporations (CMC) itemizing was to express the opinion of the Safety Division which could perform a reference for various authorities departments.

“In all probability essentially the most extreme consequence for CMC firms is U.S. funding ban, but it surely certainly’s all as a lot as Trump and his workforce.”

Craig Singleton, a China expert on the Foundation for Safety of Democracies, said the additions confirmed that it was “reckless” for American firms to conduct enterprise with a rising swath of Chinese language language companies.

“The U.S. will not be merely safeguarding a handful of utilized sciences anymore,” he said. “The yard of delicate utilized sciences is rising, and the fence defending them is being fortified. As we converse’s itemizing lays bare that these aren’t merely industrial firms. They’re important enablers of China’s navy modernization, straight fueling Beijing’s strategic ambitions.”

Totally different firms added embrace MGI Tech, which makes genomic sequencing units, and Origincell Experience, which lawmakers have alleged operates a cell monetary establishment group and bio-storage utilized sciences. Neither company immediately responded to requests for suggestions.

U.S. lawmakers had pushed the Pentagon all via 2024 in order so as to add plenty of the companies, along with CATL, to the itemizing. Ford Motor (NYSE:) is developing a battery plant in Michigan and plans to license CATL experience to produce low-cost lithium-iron batteries on the power – a switch that has sparked points by some lawmakers. Ford didn’t immediately contact upon Monday.

Whereas the designation doesn’t include fast bans, it might be a blow to the reputations of affected firms and represents a stark warning to U.S. entities and corporations regarding the risks of conducting enterprise with them. It would moreover add stress on the Treasury Division to sanction the companies.

Two beforehand listed firms, drone maker DJI and Lidar-maker Hesai Utilized sciences, every sued the Pentagon remaining yr over their earlier designations, nevertheless keep on the updated itemizing. 

The Pentagon moreover eradicated six firms it said not met the requirements for the designation, along with AI company Beijing Megvii Experience, China Railway Improvement Firm Restricted, China State Improvement Group Co and China Telecommunications Firm.