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TAKEAWAYS KEY
- Shares of Tencent Holdings sank 7% in Hong Kong trading Tuesday after the WeChat parent was added by the U.S. Department of Defense to its list of "Chinese military companies."
- The blacklist, updated annually, doesn't carry any penalties but bans the companies on it from doing business with the Defense Department.
- The designations have been deemed incorrect by Tencent as well as the maker of EV batteries CATL.
Shares of Tencent Holdings sank 7% in Hong Kong trading Tuesday after the WeChat parent was added by the U.S. Department of Defense to its list of "Chinese military companies."
Tencent and EV Battery maker CATL were included on the Section 1260H List, updated every year, that lists companies who work with Chinese military. The blacklist doesn't carry any penalties but bans the companies on it from doing business with the Pentagon.
CATL—officially Contemporary Amperex Technology Co., Ltd.—is a major supplier to Tesla (TSLA) as well as Chrysler and Jeep parent Stellantis (STLA). The Shenzhen Stock Exchange saw a 2% drop in its shares.
Tencent Says Designation Is 'Mistake'
"As the Company is neither a Chinese military company nor a military-civil fusion contributor to the Chinese defense industrial base, it believes that its inclusion in the CMC List is a mistake," Tencent said in a filing to the Hong Kong Stock Exchange.
CATL, meanwhile, said it will work with the Pentagon to "address the false designation, including legal action if necessary."
Export controls were imposed by the U.S. on advanced semiconductors to limit China’s ability to access them in 2023. These curbs already make it more difficult for American companies like Nvidia and Intel to sell AI chip to China.
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