The US Defense Department has added Chinese tech companies Tencent, a social media and gaming giant, and CATL, the world’s largest battery maker, to a list of firms that it alleges work with China’s military.
Inclusion on the Pentagon list does not result in any immediate sanctions, but it could affect the reputations of the companies named and hinder their commercial progress, particularly if they want to do business in the United States.
Shares in Tencent, which owns Chinese super-app WeChat, were 6.5% lower in Hong Kong on Tuesday, while CATL’s Shenzhen-listed shares lost more than 3%.
They join dozens of other alleged Chinese military companies on the list that the Defense Department alleges operate directly or indirectly in the US, according to a notice posted to the Federal Register on Monday.
The Pentagon has said the so-called 1260H list, which is updated annually, is “an important continuing effort” in highlighting and countering China’s “military-civil fusion” strategy, a goal to develop the most technologically advanced military in the world by eliminating barriers between the country’s civilian research and commercial sectors and its armed forces.
“We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding,” a spokesperson said.
A tech rivalry between Washington and Beijing has been escalating ahead of the inauguration of US President-elect Donald Trump later this month. Last week, Beijing said it was planning to curb the export of technology used to extract minerals critical for the growth of the global electric vehicle (EV) industry.
In December, the outgoing Biden administration imposed fresh export controls on US-made semiconductors that Washington fears Beijing could use to make the next generation of weapons and artificial intelligence (AI) systems.
The US Commerce Department said the goal of the curbs was to slow China’s development of advanced AI tools that can be used in war and to undercut the country’s homegrown semiconductor industry, which it says threatens the national security of the US and its allies.
Since coming to power in late 2012, China’s top leader Xi Jinping has unleashed sweeping reforms to transform the Chinese military into a world-class fighting force. A key part of that modernization drive has been to better integrate the country’s private sector and defense industrial base through the sharing of resources, talent and cutting-edge technologies.
While efforts to break down barriers between China’s military and civil sectors date back to the 1990s, the military-civil fusion strategy has been increasingly promoted under Xi and elevated to a national strategy in 2014, as part of the leader’s vision to turn China into an economic, technological and military superpower.