The U.S. Department of Defense on Monday designated Tencent, the Chinese tech giant known for its dominance in social media and gaming, as a “Chinese military company,” further intensifying economic and geopolitical friction between the United States and China. The decision comes as part of a broader crackdown on Chinese businesses with alleged military ties, signaling Washington’s increasingly firm stance on limiting China’s influence in critical sectors.
Tencent’s shares in the United States dropped nearly 10% following the announcement. The Defense Department’s updated blacklist also includes other prominent Chinese companies: battery maker Contemporary Amperex Technology Company (CATL), China Overseas Shipping (COSCO), chipmaker Changxin Memory Technologies, and drone manufacturer Autel Robotics. The updated list, published in the Federal Register, now comprises 134 companies accused of operating at the intersection of commercial technology and China’s military ambitions.
In response, Tencent denied the allegations, stating in an email that the designation was “clearly a mistake” and asserting that it is neither a military company nor a supplier. The company assured stakeholders that the listing would not affect its operations and expressed a willingness to engage with the Pentagon to address the issue.
The designation serves as a caution to U.S. businesses, warning them of potential consequences if they engage with companies on the list. While inclusion does not outright ban U.S. firms from working with these entities, it could disqualify them from future Department of Defense contracts.
The impact extends beyond Tencent. CATL, a significant player in the electric vehicle battery market and a technology partner for Ford Motor’s $3.5 billion EV factory in Michigan, also pushed back against its inclusion. The company stated it had “never engaged in military-related activities” and indicated it might pursue legal action to challenge the decision. Other companies have yet to comment.
This escalation occurs amid growing bipartisan pressure in Washington to counter China’s technological and military advances. The Biden administration has expanded trade restrictions and imposed bans on dual-use products, with 140 Chinese companies targeted in recent months. Moreover, new rules under consideration could restrict or ban Chinese-manufactured drones in the U.S.
Beijing has responded with retaliatory measures, including an investigation into U.S. chipmaker Nvidia, restrictions on rare mineral exports to the U.S., and actions exposing vulnerabilities in American supply chains. Concurrently, Treasury Secretary Janet Yellen and her Chinese counterpart, He Lifeng, held talks on Monday to address these rising tensions. While both sides acknowledged economic challenges, no significant resolutions were achieved.
This ongoing economic tit-for-tat reflects the broader struggle for global dominance between the world’s two largest economies, with no clear resolution in sight.