US Designates Tencent and CATL as Military Companies: Implications and Reactions

The US Adds Tencent and CATL to the Military Companies List: What It Means

The US Department of Defense has recently included tech giant Tencent and lithium-ion battery manufacturer CATL in its list of Chinese military companies. This move, first reported by Bloomberg, doesn't invoke immediate sanctions or bans but could complicate the business operations of these firms within the United States.

Background of the Designation

This designation stems from an executive order issued by then-President Donald Trump in 2020, aimed at preventing US companies from investing in organizations with affiliations to the Chinese military. This list previously featured companies like DJI, which faced obstacles in unfortunate ways when the US Customs blocked its drone imports. DJI has since filed a lawsuit, claiming that the designation has led to significant "lost business deals" and has unfairly branded it as a national security threat.

Tencent: A Major Player in Tech and Gaming

Tencent is widely recognized for owning the immensely popular messaging app WeChat and has a substantial stake in the gaming industry. It owns Riot Games, the developer behind the acclaimed League of Legends, and has made investments in other leading developers like Epic Games, Larian Studios, Ubisoft, and FromSoftware. As a result, Tencent has a significant influence on the global gaming landscape.

CATL: The Titan of Electric Vehicle Batteries

CATL stands as the world’s largest manufacturer of electric vehicle batteries, powering many well-known brands such as Tesla, Ford, Volkswagen, BMW, and more. The company’s technology is crucial for the growing EV market as the world shifts towards more sustainable energy solutions.

Reactions from Tencent and CATL

Both Tencent and CATL have expressed their intention to dispute the designations. In a statement to The Verge, Tencent spokesperson Danny Marti declared, "We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding.” Meanwhile, CATL described its inclusion on the list as "clearly a mistake."

Restoration of Companies from the List

Historically, companies have been removed from this list. For instance, in 2021, the US lifted its designation off Chinese phone manufacturer Xiaomi just months after adding it. This raises questions about the future status of Tencent and CATL on the list and how it may evolve depending on ongoing discussions and potential lobbying efforts.

Conclusion

While the addition of Tencent and CATL to the Department of Defense's list does not currently impose strict penalties, it highlights growing tensions between the U.S. and China, particularly regarding technology and national security. As companies navigate these new designations, their responses, along with changes in U.S. policy, will significantly shape their future business strategies.