DoD adds more Chinese tech firms to its list of military-linked organizations

The U.S. Department of Defense has expanded its list of Chinese companies with alleged military connections, adding major tech firms Tencent, SenseTime, and battery maker CATL.

Key developments: The Defense Department’s “Chinese Military Companies” (CMC) list has grown to include 134 companies, triggering significant market reactions and corporate protests.

• Under the National Defense Authorization Act of 2024, the Defense Department will be prohibited from conducting business with listed companies starting June 2026
• Tencent’s stock experienced a sharp 7.3% decline following the announcement, while CATL shares fell 2.84% in Shenzhen trading
• The affected companies strongly deny any military connections, with Tencent describing the designation as a “mistake” and seeking to have the decision reversed

Corporate responses and impact: Major Chinese technology and industrial leaders have issued strong denials of military ties while facing immediate market consequences.

• CATL, the world’s largest electric vehicle battery manufacturer, explicitly rejected claims of military connections
• SenseTime, a prominent artificial intelligence company, contested its inclusion on the list
• The designations could significantly impact these companies’ ability to conduct business with U.S. entities and access American technology

Diplomatic tensions: China’s government has responded forcefully to the U.S. action, highlighting escalating technology-related conflicts between the two nations.

• The Chinese Foreign Ministry demanded immediate correction of what it termed “wrong practices” and called for lifting sanctions on Chinese companies
• Chinese officials accused the U.S. of “overstretching the concept of national security” to suppress Chinese businesses
• This move aligns with broader U.S. efforts to restrict China’s access to advanced technologies, particularly in semiconductors and artificial intelligence

Strategic implications: This expansion of restrictions reflects growing concerns about technology transfer and national security in U.S.-China relations.

• The CMC list serves as a key tool in the U.S. strategy to limit technological cooperation with Chinese firms deemed security risks
• The inclusion of major consumer-facing companies like Tencent signals an expansion of scrutiny beyond traditional military suppliers
• These restrictions could have far-reaching implications for global supply chains and technological development

Global technology landscape: The expanding restrictions on Chinese companies signal a deepening divide in the global technology ecosystem, potentially accelerating the development of parallel technology infrastructures between East and West markets.