Tencent's shares fall 8% in Hong Kong after U.S. labels it as a Chinese military company

The U.S. Department of Defense has added Tencent to its list of "Chinese military companies" (Section 1260H). For context, Section 1260H is part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021.

Thanks to the NDAA, the Pentagon must publish a list of Chinese military companies operating in the U.S., directly or indirectly. Tencent is not the only company on the list, though; other notable companies include DJI and SMIC Holdings. You can check out the full list here.

CNBC reports that shortly after Tencent was added to the list, the company's shares fell by 8% in Hong Kong. The company also responded by claiming that it was "not a military company or supplier."

Section 1260H defines a "Chinese military company" as an entity that is:

(i)(I) directly or indirectly owned, controlled, or beneficially owned by, or in an official or unofficial capacity acting as an agent of or on behalf of, the People's Liberation Army or any other organization subordinate to the Central Military Commission of the Chinese Communist Party; or

(II) identified as a military-civil fusion contributor to the Chinese defense industrial base; and

(ii) engaged in providing commercial services, manufacturing, producing, or exporting.

The Department of Defense says that companies that wish to be excluded from the list must make a request for reconsideration, which should include the following items:

1. The listed entity’s name and mailing address (including email address) and an authorized representative’s name and mailing address (including email address)
2. A statement indicating the entity’s intent to request reconsideration of the Department’s determination, including a detailed description with supporting evidence of why the listed entity should be removed from the 1260H List.

The rivalry between the USA and China has been going on for quite a while now. For example, we previously reported that Uncle Sam is considering a ban on TP-Link routers because of national security concerns. "National security" is frequently used as a reason for the U.S. to take action against Chinese companies operating in the U.S.

TP-Link routers are everywhere in the U.S. So, if they actually go ahead with the ban, it won’t be the first time the U.S. takes something away from everyday citizens. Remember, they’ve already banned U.S. companies from selling or exporting tech to Huawei. And this isn’t just some empty threat either. Case in point: in April 2023, Seagate got hit with a $300 million fine for breaking U.S. export rules by selling $1.1 billion worth of hard drives to Huawei.

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