U.S.-China Tensions Flare as Tencent and CATL Face Military Links

The U.S. Defense Department has listed Chinese firms Tencent and CATL among companies allegedly linked to China's military, escalating tensions between the U.S. and China. Both companies deny the claims, while their stock values dropped significantly. The move could lead to broader sanctions and enhanced scrutiny on Chinese enterprises.

In a move that is likely to exacerbate already strained U.S.-China relations, the U.S. Defense Department has added Chinese tech conglomerate Tencent Holdings and battery giant CATL to a list of firms it accuses of cooperating with China's military. This decision, announced on Monday, sent shockwaves through the stock market, with Tencent's shares plummeting by 7.3% and CATL's not far behind with a 2.8% drop.

Tencent, the parent company of popular messaging app WeChat, and CATL, the world's leading electric vehicle battery maker, swiftly pushed back against the accusation, labeling it a 'mistake.' They vowed to initiate processes to contest their inclusion, and if necessary, pursue legal action against the decision that could tarnish their reputations.

This development is seen as part of a broader strategy by Washington to confront perceived security risks posed by Chinese enterprises, raising the stakes for American companies doing business with them. The list, known formally as the 'Section 1260H list,' includes a total of 134 entities and has already spurred reactions from U.S. legislators urging further sanctions.

(With inputs from agencies.)