The US government has officially designated several Chinese technology companies, including the gaming and social media powerhouse Tencent and battery manufacturer CATL, as entities that work with China's military. This designation serves as a cautionary note to American businesses and organizations regarding the potential risks associated with collaborating with Chinese companies. While this classification may not automatically trigger a ban, it could intensify calls for the US Treasury Department to impose sanctions on these firms.
Both Tencent and CATL have firmly rejected any claims of military involvement, while China has decried the US's actions as an "unreasonable suppression of Chinese firms." The US Department of Defense (DOD) maintains an annually updated list of Chinese military-affiliated companies, known as the Section 1260H list, which now encompasses 134 firms. This list is a component of Washington's strategy to counter what it perceives as China's efforts to enhance its military capabilities by leveraging technology sourced from its corporations, educational institutions, and research entities.
In a response to its recent inclusion, Tencent, recognized for its popular messaging platform WeChat, labeled the decision "clearly a mistake." The firm stated, "We are not a military company or supplier." They emphasized that being listed does not equate to sanctions or export restrictions and has no bearing on its business operations. Likewise, CATL refuted the military association claim, asserting that it does not partake in any activities related to the military sector.
A spokesperson for the Chinese embassy in Washington, Liu Pengyu, expressed that the US practices contradict market competition principles and international economic norms, thereby eroding the confidence of foreign firms to both invest and operate in the US market. The Pentagon faced mounting pressure from US lawmakers to include specific companies, including CATL, on the list. This pressure intensified around the same time that Ford, a prominent American automotive manufacturer, announced a $2 billion investment to establish a battery plant in Michigan, intending to license technology from CATL. Ford has not yet issued a comment regarding the situation.
As this development unfolds, tensions between the two largest economies in the world remain palpable. Additionally, Donald Trump, known for his previously hardline approach toward China, is expected to return to the White House later this month. The Pentagon has previously encountered legal challenges, with drone manufacturer DJI and Lidar technology firm Hesai Technologies filing lawsuits last year over their inclusion in the military-affiliated list. Both companies continue to remain on the updated list.
