The share prices of Chinese technology company Tencent Holdings and battery maker Contemporary Amperex Technology (CATL) fell sharply on Tuesday following their inclusion in the Pentagon’s list of companies allegedly linked to the Chinese military.
Hong Kong-listed Tencent shares closed down 7.28%, while Shenzhen-listed CATL ended the day down 2.84%, having lost over 5% at the open. Meanwhile, the share price of Shanghai-listed Quectel Wireless, another newly listed company, fell around 8% in the morning and ended the day down 6.18%.
These companies were added on Monday to the “Section 1260H list” under the 2021 National Defence Authorization Act by the U.S. Department of Defense, which identifies them as “Chinese military companies operating in the U.S.”
In response, Tencent, CATL, and Quectel Wireless denied the allegations, with Tencent’s U.S. over-the-counter shares falling 7.82% overnight. The companies stated the inclusion was a mistake, with Quectel’s statement being reported by Reuters.
Although inclusion on the list does not equate to a ban or directly impact company operations, analysts noted the potential reputational damage.
Ivan Su, a senior equity analyst at Morningstar, said in a note: “Given Tencent’s business model, which mainly revolves around social networking and online gaming, we believe the company has a good chance of securing delisting through U.S. courts, just as Xiaomi was successfully delisted four months after being listed in 2021.”
The list’s scope expanded under a December amendment to the National Defence Authorisation Act, broadening the definition of “Chinese military companies” to include entities associated with Chinese military, paramilitary, security forces, law enforcement, and border control, as well as the State-owned Assets Supervision and Administration Commission. A Hong Kong-based lawyer specializing in sanctions noted this shift as a significant change in U.S. policy.
The lawyer added, “This effectively broadened the definition. The current U.S. administration appears to be exercising its power in the final days of its term.”
AI company SenseTime, also added to the list, issued a statement strongly opposing the move, stating it had “no factual basis” and caused no material impact on its business. Similarly, Hesai Technology, re-listed after being previously removed, vowed to continue legal proceedings. CEO David Li described the designation as “ridiculous” in an interview with Nikkei Asia.
Companies removed from the list include Megvii and China Railway Construction Corporation (CRCC), while entities such as IDG Capital and AMEC previously fought legal battles to secure delisting.
Chinese Foreign Ministry spokesman Guo Jiakun condemned the Pentagon’s actions, stating, “China strongly opposes the U.S. generalizing the concept of national security and creating discriminatory lists under different categories to unreasonably pressure Chinese companies.”
