The US Defence Department said on Monday it has added Chinese tech giants including gaming and social media leader Tencent Holdings and battery maker CATL to a list of firms it says work with China’s military.

The list also included chip maker Changxin Memory Technologies, Quectel Wireless, drone maker Autel Robotics, and China’s largest shipping company COSCO Shipping Holdings, according to a document published on Monday.

Two entities owned by Chinese state-owned oil major China National Offshore Oil Corporation (CNOOC) were also listed, CNOOC China Ltd and CNOOC International Trading.

The annually updated list of Chinese military companies, formally mandated under US law as the “Section 1260H list,” designated 134 companies, according to a notice posted to the Federal Register.

While the designation does not involve immediate bans, it can be a blow to the reputations of affected companies and represents a stark warning to US entities and firms about the risks of conducting business with them. It could also add pressure on the US Treasury Department to sanction the companies.

The Hong Kong-listed shares of Tencent fell as much as 7 per cent in early trade, while the US-traded shares of the company, which is also the parent of Chinese instant messaging app WeChat, fell 8pc in over-the-counter trading.

Tencent said in a statement that its inclusion on the list was “clearly a mistake.” It added: “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business.”

CATL, the world’s largest electric vehicle battery maker whose Shenzhen-listed shares dropped more than 5pc, also called the designation a mistake, saying it “is not engaged in any military-related activities.”

A Quectel spokesperson said the company “does not work with the military in any country and will ask the Pentagon to reconsider its designation, which clearly has been made in error.” Quectel’s shares fell nearly 7pc. COSCO’s HK-listed shares dropped more than 4pc.

The Chinese embassy in Washington said it opposed the move and urged the US to correct its “discriminatory practices”, adding that China would safeguard the legitimate rights and interests of its own firms.

The other companies did not immediately respond to requests for comment.

Impact on companies

The updated list is one of numerous actions taken by Washington in recent years to highlight and restrict Chinese companies it says pose security risks, weighing on strained relations between the world’s two biggest economies.

In 2021, the US Defence Department removed Xiaomi after the Chinese tech firm sued the US government for including it on the list. A federal judge had called the US government’s process to include Xiaomi “deeply flawed”.

Morningstar senior equity analyst Ivan Su said he believed Tencent had a good chance to secure exclusion through US courts, like Xiaomi, but that its inclusion could result in reputational damage.

Tencents US earnings exposure was in the high-single-digit percentage range, he added, mostly made up of gaming revenue.

“While this represents the maximum potential downside, we see it as highly unlikely that Tencents US gaming revenue will be affected over the near term.”

Jefferies said in a research note the purpose of the Chinese Military Companies (CMC) list was to express the opinion of the Defence Department which could serve as a reference for other government departments.

“The most serious consequence for CMC companies is US investment ban, but it’s all up to Trump and his team.”

Craig Singleton, a China expert at the Foundation for Defence of Democracies, said the additions showed that it was “reckless” for American firms to conduct business with a growing swath of Chinese corporations.

“The US isn’t just safeguarding a handful of technologies anymore,” he said. “The garden of sensitive technologies is growing, and the fence protecting them is being fortified.”

Other companies added include MGI Tech, which makes genomic sequencing instruments, and Origincell Technology, which lawmakers have alleged operates a cell bank network and bio-storage technologies. Neither firm immediately responded to requests for comments.

US lawmakers had pushed the Pentagon throughout 2024 to add some of the companies, including CATL, to the list.

Ford Motor is building a battery plant in Michigan and plans to license CATL technology to produce low-cost lithium-iron batteries at the facility — a move that has sparked concerns by some lawmakers. Ford did not immediately comment on Monday.

Two previously listed companies, drone maker DJI and Lidar-maker Hesai Technologies, both sued the Pentagon last year over their previous designations, but remain on the updated list.

The Pentagon also removed six companies it said no longer met the requirements for the designation, including AI firm Beijing Megvii Technology, China Railway Construction Corporation Limited, China State Construction Group Co and China Telecommunications Corporation.