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Tencent and CATL are planning legal action to challenge being placed on a Pentagon list as “Chinese military companies”, if talks with the US defence department fail to get their new designations dropped.
The social media and gaming giant and the world’s largest electric vehicle battery maker both announced on Tuesday they would contest their inclusion on an annually updated list of companies determined to have links with China’s military machine.
Pony Ma, Tencent founder and chair, said in a statement that the company would “engage in discussions with the U.S. Department of Defense” to be removed from Monday’s list, adding that “if necessary, [Tencent] will undertake legal proceedings”.
He said Tencent was “neither a Chinese military company nor a military-civil fusion contributor to the Chinese defence industrial base”.
CATL said in a statement it had “never engaged in any military-related business or activities”, the move was a “mistake” and was “expected to have no substantially adverse impact on our business”.
It also said it would “proactively engage” with the defence department “to address the false designation, including legal action if necessary, to protect the interests of our company and shareholders as a whole”.
Analysts said there was a strong precedent for Chinese consumer tech companies being removed from the list if they could prove wrongful designation.
In 2021, consumer electronics group Xiaomi successfully removed itself from the Pentagon list when a federal court determined there was insufficient evidence for the designation.
“We believe [Tencent] has a good chance to secure exclusion through US courts,” wrote Ivan Su, senior equity analyst at Morningstar, in a note to clients. On Monday, the Department of Defense also removed artificial intelligence group Megvii from the list.
Tencent’s announcement comes after investors dumped shares in the country’s largest company by market capitalisation, with shares falling by 7 per cent in Hong Kong on Tuesday.
The Pentagon listing will not have any immediate impact on Tencent’s business, but could presage tougher action from the incoming Trump administration.
A trade lawyer in Hong Kong who represents Chinese tech clients said the US move against Tencent marked an “escalation” in the US-China tech war “given that it is such a widely known company and one that is not clearly associated with the Chinese military”.
They added that the move “raises the risk that the companies could be added to other more biting lists, such as the Entity List, which would bar them from procuring certain US technology”.
Tencent has nearly 1.4bn monthly active users for the domestic and international versions of WeChat, the dominant messaging platform in China that also acts as a portal for users to read the news, book travel and play online games.
The first Trump administration tried to ban WeChat from operating in the US in 2020, arguing that the app provided a channel for the Chinese government to access information about Americans, to surveil Chinese citizens living overseas and carry out misinformation campaigns. A federal judge issued an injunction against Trump’s executive order, saying it violated the constitution.
Cosco, one of China’s largest shipping companies, chip manufacturer ChangXin Memory Technologies, drone maker Autel Robotics and IT equipment maker Quectel Wireless Solutions were also among fresh names on the Pentagon’s list.
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