Tencent Holdings Ltd. TCEHY and Contemporary Amperex Technology Co. Limited, two of China’s leading technology companies, are preparing legal challenges after being added to the U.S. Department of Defense’s list of Chinese Military Companies on Wednesday.
What Happened: The designation, which primarily affects U.S. defense procurement, triggered significant market reactions. Tencent’s shares fell 7.8% in Hong Kong trading on Tuesday, while CATL’s stock dropped 6% in Shenzhen. Both companies strongly denied any military connections and announced plans to engage with U.S. authorities.
Tencent, a major gaming and social media conglomerate, stated in a regulatory filing that it is “neither a Chinese military company nor a military-civil fusion contributor.” The company, led by Chairman Ma Huateng, emphasized that the listing wouldn’t affect its broader business operations or securities trading.
Tencent owns Riot Games, and Supercell, and has stakes in Reddit, Snap, and Epic Games.
CATL, a key supplier to Tesla Inc. TSLA, similarly rejected the designation, stating it has “never engaged in any military-related business or activities.” The company assured shareholders that the listing would not substantially impact its operations.
Both Tencent and CATL have initiated reconsideration processes and indicated their willingness to pursue legal action if necessary.
Why It Matters: This development comes amid escalating U.S.-China trade tensions. China’s Ministry of Commerce recently imposed new trade controls, adding 28 U.S. companies to an export control list and restricting major defense contractors like Lockheed Martin Corp. LMT and Boeing Co. BA from operating in China.
Despite these challenges, Tencent continues to show strong business fundamentals. Goldman Sachs recently maintained a Buy rating on the company, citing its leadership in video entertainment and artificial intelligence development. The company’s WeChat ecosystem remains robust, with users accessing the app 40-50 times daily.
The Pentagon’s designation specifically relates to Section 1260H list compliance, which serves as a warning mechanism for U.S. entities but does not prohibit general business dealings or securities transactions with listed companies.
Price Action: Tencent’s stock is trading at HK$ 373.60 ($48.04) on Wednesday, down 1.58% for the day. Over the past year, the stock has gained 29.51%.
CATL’s stock is currently trading at CNY 246.28 ($33.59) on Wednesday, down 1.27% for the day. Over the past year, the stock has surged 64.09%.
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