Tencent and CATL plan to legally challenge their inclusion on the U.S. Department of Defense’s Chinese Military Companies list. Both companies denied military ties and are engaging with U.S. authorities. This designation affects their stock performance but not overall operations, amid rising U.S.-China trade tensions, with Tencent retaining a strong market position despite challenges.
Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Limited (CATL) are preparing to initiate legal actions after being included on the U.S. Department of Defense’s list of Chinese Military Companies. Following this designation, Tencent’s shares in Hong Kong experienced a decline of 7.8%, while CATL’s stock also fell by 6% on the Shenzhen exchange. Both firms have categorically denied any military affiliations and are engaging with U.S. authorities regarding their listings.
Tencent, recognized as a prominent gaming and social media enterprise, asserted in a regulatory filing that it is “neither a Chinese military company nor a military-civil fusion contributor” and assured stakeholders that this designation will not disrupt their business operations or trading of securities. Tencent’s portfolio includes ownership of Riot Games and Supercell, as well as investments in Reddit, Snap, and Epic Games.
CATL, a significant supplier for Tesla, echoed similar sentiments, firmly stating that it has “never engaged in any military-related business or activities.” The company also guaranteed that its operations would not experience considerable adverse effects due to the listing. Both companies have commenced reconsideration processes and signaled their readiness to pursue legal recourse if necessary.
This situation emerges amid escalating trade tensions between the United States and China. Notably, China’s Ministry of Commerce has recently enacted new trade regulations, extending export control lists to 28 U.S. companies and imposing restrictions on major defense firms, including Lockheed Martin and Boeing. Despite these challenges, Tencent’s strong fundamentals remain evident, with Goldman Sachs reaffirming a Buy rating due to its leadership in video entertainment and AI development.
The Pentagon’s designation relates to compliance with Section 1260H, serving as a warning for U.S. entities without prohibiting business relations or securities transactions with the designated companies. With current stock prices, Tencent’s shares are trading at HK$ 373.60 ($48.04), and CATL’s at CNY 246.28 ($33.59), showing slight decreases for the day but significant annual gains of 29.51% and 64.09%, respectively.
The article discusses the legal challenges being mounted by Tencent Holdings Ltd. and CATL against the Pentagon’s designation of them as Chinese Military Companies. Such a designation has implications for defense contracting and may affect their business operations amidst rising U.S.-China trade tensions. The article further explores how this situation relates to broader industry dynamics and market reactions, given the companies’ prominent roles in technology and electric vehicles.
In conclusion, both Tencent Holdings and CATL are contesting their recent designation as Chinese Military Companies by the U.S. Department of Defense, asserting that they have no military affiliations. The companies are prepared to engage in legal action while maintaining assurances about their business continuity. This matter highlights the ongoing trade tensions between the U.S. and China, reflecting the complex landscape of international business and regulatory scrutiny.
Original Source: www.benzinga.com
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