The US has added social media and gaming giant Tencent to an updated list of firms that it alleges have ties to China’s military.
The Defense Department has added the parent company of WeChat to its annually updated Section 1260H list of companies which Washington believes participate in China’s “Military-Civil Fusion strategy”.
The strategy is reportedly aimed at modernising the Chinese military by working with local companies.
Tencent, which has a stake in popular video games PUBG and Fortnite, called its inclusion in the list “a mistake” and said it was willing to work with Pentagon to “address any misunderstanding”.
The company said it would initiate a “reconsideration process” and undertake legal proceedings if necessary.
“We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business,” the internet giant said.
The updated list, released just days before Donald Trump takes over as the president, also includes battery maker CATL, which supplies to global EV makers like Tesla.
CATL responded to the Pentagon’s list saying that it was “not engaged in any military-related activities”.
The Chinese foreign ministry said, in a briefing on Tuesday, it had urged the US to lift its “illegal unilateral sanctions” against the companies.
Although addition to the list does not mean an immediate ban, it affects the reputations of the companies and puts pressure on the Treasury to sanction them. It also disincentivises American firms from dealing with these Chinese companies.
Shares of Tencent Holdings fell by nearly 7 per cent on Tuesday after its inclusion in the Pentagon list became known, costing the company $35.4bn in market value. Shares of CATL fell about 4 per cent.
The move comes amid a growing trade war between the US and China which escalated last week when Beijing banned the export of technology used to extract key minerals for the electric vehicle industry.
China also recently banned the export of products to 28 US defence companies and put 10 of them on its “unreliable entities” list.
In addition, Beijing sanctioned seven American companies in response to Washington announcing military sales and aid to Taiwan.
The US has expanded export controls on semiconductors to China, alleging that Beijing could use them to make next-generation weapons and artificial intelligence systems for its military.
The US is also mulling a ban on the sale of a popular Chinese-made internet router that is already in use in many American homes.
