The Biden administration has added CXMT, Tencent, and CATL to its list of companies linked to the Chinese military, increasing tensions between the U.S. and China. Tencent and CATL both claimed their inclusion was erroneous, asserting no ties to military activities. While immediate sanctions are not imposed, being on the list poses reputational risks and could lead to further restrictions.
The Biden administration has intensified measures against Chinese firms, adding prominent technology companies CXMT, Tencent, and CATL to its list of entities allegedly associated with the Chinese military. This action by the U.S. Defense Department updates the annual Section 1260H list of military-affiliated companies to include 134 firms. This designation is rooted in a 2020 executive order initiated by former President Trump, which prohibited U.S. investments in companies tied to China’s military initiatives.
The inclusion of Tencent, a significant player in the gaming sector, surprised many as it owns Riot Games and has investments in companies like Epic Games and Ubisoft. The company responded by stating that its placement on the list is a mistake and stressed that it does not engage in military activities. Meanwhile, CATL, recognized as the leading electric vehicle battery producer, echoed these sentiments, asserting no connection to military operations, though confirming that the listing would not impede its business operations.
Interestingly, CXMT, the leading memory maker in China, has now been listed despite previously avoiding U.S. export restrictions in December 2024. While the latest designations do not impose immediate sanctions, they pose reputational risks for these companies and caution U.S. businesses about potential dealings with them. There are concerns that this may prompt the Treasury Department to consider imposing sanctions in the future.
The experience of DJI, another Chinese firm previously added to the Pentagon’s list, illustrates potential consequences as they reported that the designation led to blocked imports and damaged business relationships. It is noteworthy that companies are not permanently designated on this list; evidence of this can be seen as Xiaomi was removed shortly after its initial inclusion in 2021. The Pentagon has also recently removed six firms, indicating some companies no longer meet the criteria for this designation.
In recent years, the U.S.-China trade landscape has become increasingly fraught, particularly under the influence of heightened national security concerns. The Biden administration has continued to redefine U.S. foreign investment policies by building upon earlier measures introduced by the Trump administration, with a focus on limiting capital flow into firms associated with the Chinese military. The Section 1260H list has become a key instrument in identifying and monitoring companies that the U.S. perceives to be linked to military endeavors, influencing both domestic and international business environments.
In conclusion, the addition of CXMT, Tencent, and CATL to the U.S. military-linked companies list reflects ongoing tensions between the U.S. and Chinese technology sectors. This list, which now comprises 134 firms, represents mounting scrutiny of Chinese entities and their potential military connections. While the designation does not impose direct sanctions currently, it poses significant reputational risks for the designated companies and could foreshadow future sanctions by U.S. authorities.
Original Source: www.trendforce.com
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