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US Adds Tencent, Tesla Supplier CATL To 'Chinese Military' Blacklist, Shares Tumble

Theodore QuinnTuesday, Jan 7, 2025 5:02 am ET
4min read


The U.S. Department of Defense (DoD) has added Chinese tech giant Tencent Holdings Ltd. and electric vehicle (EV) battery maker Contemporary Amperex Technology Co. Ltd. (CATL) to its list of "Chinese military companies" operating in the U.S. The move, announced on Monday, has sent shares of both companies tumbling in Hong Kong and U.S. trading.

Tencent, one of the most valuable tech companies in China, saw its Hong Kong-listed stock drop nearly 8% on Tuesday, making it the top decliner on the city's benchmark Hang Seng Index. CATL, the world's largest battery maker, also fell, with its shares in Shenzhen losing 2.6% of their value.

The DoD's list, which now includes 134 companies, is an important effort to highlight and counter China's Military-Civil Fusion strategy, which supports the modernization goals of the People's Liberation Army (PLA) by ensuring it can acquire advanced technologies and expertise developed by civilian entities. Being placed on the list does not impose immediate legal or economic restrictions, but it could pressure the U.S. Treasury Department to impose restrictions and trigger the U.S. Commerce Department's Bureau of Industry and Security (BIS) to add a listed company to its Entity List, blocking access to American technologies.

Tencent and CATL have both denied any connections with China's military, calling their inclusion on the U.S. list a "mistake." A CATL spokesperson said the company isn't engaged in any military-related activities, while Tencent said it was neither a military company nor a supplier. Analysts, however, believe that the inclusion on the list may pose only a short-term drag on shares, as companies have successfully lobbied to be removed from the list in the past.



Tencent's gaming and fintech divisions have driven its growth despite China's domestic consumption slowdown, with its Hong Kong-listed stock gaining over 42% in 2024. CATL, meanwhile, has a strong position in the EV market, with its products appearing in EVs from Tesla, Ford, Volkswagen, BMW, and more. Despite the political headwinds, both companies' core businesses remain robust and have long-term growth potential.

CAT, TME Interval Closing Price


The U.S. government's actions could significantly impact the global supply chain and competition in the tech and EV industries. Tencent and CATL have extensive global partnerships, and their inclusion on the list may discourage U.S. customers from purchasing their products, potentially disrupting supply chains and creating opportunities for competitors. For instance, CATL's designation could encourage U.S. EV manufacturers to source batteries from alternative suppliers like LG Chem or Panasonic, intensifying competition in the EV battery market.

The outcome of the U.S. elections in 2024 could also influence the future of the blacklist and the investment landscape for Chinese companies. If a new administration takes a more conciliatory approach towards China, it may review and potentially reduce the number of companies on the blacklist, as seen with the removal of Xiaomi and Advanced Micro-Fabrication Equipment Inc. from the list. This could lead to a more favorable investment climate for Chinese companies, as demonstrated by the market's resilience across varying leadership.

Investors can balance the potential risks and rewards of investing in companies like Tencent and CATL by considering their strong fundamentals and the geopolitical tensions. Diversifying portfolios, monitoring geopolitical developments, and engaging with the companies to understand their responses to the listings can help mitigate risks. By staying informed and engaged, investors can make more informed decisions about their investments in these companies.
Comments

Post
Kooky-Information-40
01/07
$TSLA is back to $420, everyone!
0
SussyAltUser
01/07
$TSLA There's no reason to expect anything but a bearish week ahead for Tesla.
0
Ditty-Bop
01/07
$AMD It was clear from the start that $AMD was going to be the top play of the year, and I'm thrilled I jumped on board :) Despite a huge drop in value so far this year, all the way down to 118ish, this was an incredible opportunity. The ones who didn't see it and stayed bearish at 118 are beyond comprehension. I hope they enjoy their red profiles! This is such an obvious buy.
0
girldadx4
01/07
$TSLA, what's the latest FUD? Bring it down to below $400 again so I can buy more. Thanks!
0
khasan14
01/07
Tencent's gaming division is a hidden gem.
0
r2002
01/07
Holding $TSLA for now, watching CATL closely.
0
StrangeRemark
01/07
EV market competition is about to heat up.
0
waterlimes
01/07
Holding $TSLA for EV growth, but diversifying with non-Chinese battery suppliers due to geopolitical tensions.
0
rvnmsn
01/07
Tencent and CATL getting slapped with this label feels like a temporary glitch. Long-term, these tech giants are still cruising.
0
breakyourteethnow
01/07
Geopolitics can't stop innovation forever, right? 😏
0
MyNi_Redux
01/07
Tencent's gaming division is a powerhouse. Long-term, this dip might be a buy opportunity. 🚀
0
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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