Written by Michael Martina, David Shepardson, and Karen Freefield
WASHINGTON/NEW YORK (Reuters) – The U.S. Defense Department said on Monday it has added Chinese technology giants including gaming and social media leader Tencent Holdings (OTC:) and battery maker CATL to a list of companies it says are working with the Chinese military. .
The list also included chip maker Changxin Memory Technologies, Quectel Wireless and drone maker Autel Robotics, according to a document published on Monday.
The annually updated list of Chinese military companies, formally mandated under U.S. law as the “Section 1260H List,” identified 134 companies, according to a notice published in the Federal Register.
Hong Kong-listed shares of Tencent fell as much as 7% in early trading, while US-traded shares of the company, which is also the parent of Chinese instant messaging app WeChat, fell 8% in over-the-counter trading. .
Tencent said in a statement that its inclusion on the list was a “clear error.” “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business,” she added.
CATL, the world's largest electric vehicle battery maker whose Shenzhen-listed shares fell more than 5%, also called the designation a mistake, saying it “does not engage in any military-related activities.”
A Quectel spokesperson said the company “does not work with the military of any country and will ask the Pentagon to reconsider its designation, which was clearly done in error.” Quectel shares fell nearly 7%.
The other companies and the Chinese Embassy in Washington did not immediately respond to requests for comment.
Impact on companies
The updated list is one of several measures Washington has taken in recent years to highlight and restrict Chinese companies, which it says pose security risks, affecting tense relations between the world's two largest economies.
The purpose of the list of Chinese military companies (CMC) is to express the opinion of the Department of Defense that can serve as a reference for other government departments, Jefferies said in a research note.
“The most dangerous outcome for CMCs is a ban on US investment, but that is all up to Trump and his team.”
Craig Singleton, a China expert at the Foundation for Defense of Democracies, said the additions show it is “reckless” for American companies to do business with a growing array of Chinese companies.
“The United States is no longer just protecting a few technologies,” he said. “The sensitive technology park is growing, and the fence protecting it is being fortified. Today’s list reveals that these are not just commercial companies. They are critical enablers of China’s military modernization, and directly feed into Beijing’s strategic ambitions.”
Other companies added include MGI Tech, which makes genetic sequencing tools, and Origincell Technology, which lawmakers alleged runs a cell banking network and biostorage technologies. Neither company immediately responded to requests for comment.
US lawmakers had pressed the Pentagon throughout 2024 to add some companies, including CATL, to the list. Ford Motor Company (NYSE:) is building a battery factory in Michigan and plans to license CATL technology to produce low-cost lithium-iron batteries at the facility — a move that has raised concerns among some lawmakers. Ford did not immediately comment Monday.
Although the designation does not entail an immediate ban, it could be a blow to the reputation of affected companies and represents a stark warning to US entities and companies about the risks of doing business with them. It could also increase pressure on the Treasury Department to impose sanctions on companies.
Two previously listed companies, drone maker DJI and lidar maker Hesai Technologies, sued the Pentagon last year over their previous designations, but are still on the updated list.
The Pentagon also removed six companies that it said no longer met designation requirements, including artificial intelligence firm Beijing Megvii Technology, China Railway Construction Corporation Limited, China State Construction Group Co, and China Tecommunication Corporation.
