The United States Department of Defense has been criticized by Chinese commentators for pushing unilateralism after it added Tencent Holdings and Contemporary Amperex Technology Co (CATL) to its “Chinese military companies” list.
The department on January 7 released an update of the Section 1260H list of Chinese military companies operating directly or indirectly in the US. The updated CMC list now includes 134 Chinese companies.
From HK$408.6 on January 6, shares of Tencent, the largest Hong Kong-listed company by market cap, have declined 9.5% to HK$369.6 as of January 10. Shares of the Shenzhen-listed CATL have dropped 4.2% to 246 yuan (US$33.5) during the period.
Apart from Tencent and CATL, Commercial Aircraft Corporation of China Limited (Comac), which produces China’s self-developed C919 airliners, was added to the CMC List for the second time. The company had been on the list in January 2021 but was then removed in June of the same year after winning an appeal.
Major suppliers to Comac’s C919 aircraft include the United States’ GE Aviation, Collins Aerospace and Honeywell Aerospace and France’s Safran Aircraft Engines.
A dozen subsidiaries of the previously-blacklisted Aviation Industry Corporation of China Ltd (AVIC), China Aerospace Science and Industry Corporation Limited (CASIC) and China Communications Construction Group (CCCG) were added to the CMC List.
The Hefei-based ChangXin Memory Technologies Inc (CXMT), which produces DRAM for use in computer servers and smart vehicles, is also on the blacklist now.
Last March, media reports said CXMT would be blacklisted because it planned to make high-bandwidth memory (HBM) chips, which can be used as artificial intelligence (AI) accelerators.
The defense department said updating the Section 1260H list is an important continuing effort in highlighting and countering the People’s Republic of China’s “military-civil fusion” strategy, which aims to help the People’s Liberation Army (PLA) acquire advanced technologies and expertise from local companies, universities and research programs.
It said the US government reserves the right to take further actions on these entities under authorities other than Section 1260H.
“China stands firmly against the United States’ practice of overstretching the concept of national security, making discriminatory lists in various names and going after Chinese companies to contain China’s high-quality development,” Guo Jiakun, a spokesperson of the Chinese Foreign Ministry, said in a media briefing on January 7.
He said the US should immediately correct its wrongdoings, and end the illegal unilateral sanctions and long-arm jurisdiction on Chinese companies. He said China will take all measures necessary to firmly defend the lawful rights and interests of Chinese companies and uphold its legitimate right to development.
‘Unfair competition’
“Some of the 134 companies on the Chinese Military Companies list are defense contractors, but many others are unrelated to the defense industry sector,” Zhou Xinping, a columnist for the Beijing Review, writes in an article published on January 9. “They are blacklisted as they are technology firms. It’s not difficult to understand why Tencent is added to the list this time.”
“This kind of suppression has nothing to do with national security, but with unfair competition,” Zhou says. “It is unethical behavior carried out by the US government against Chinese technology companies to maintain the advantages of US firms.”
Zhou says the inclusion of Tencent on the CMC List illustrates the United States’ growing unilateralism. He says it has become increasingly urgent for the international community to join together to safeguard the global trade rules and order.
“The United States’ inclusion of Chinese companies on various lists has become a means of suppressing China’s scientific and technological development,” says Huang Haifeng, a Shaanxi-based columnist. ”These moves may cause trouble to some outstanding companies in the short term, but they will help boost the innovation capabilities and international competitiveness of Chinese companies.”
Huang points out that some companies, such as Xiaomi Corp and Advanced Micro-Fabrication Equipment, had won their appeals in the past and been removed from the list. He says blacklisted firms should not be afraid of US sanctions as they can still grow their businesses by partnering with companies outside the US.
Tencent’s Chairman Ma Huateng said in a stock exchange filing on January 7 that the inclusion of Tencent in the CMC List is a mistake as the company is “neither a Chinese military company nor a military-civil fusion contributor to the Chinese defense industrial base.”
“Tencent intends to initiate a reconsideration process to correct this mistake,” he said. “During the process, it will engage in discussions with the DOD to resolve any misunderstanding, and if necessary, will undertake legal proceedings to remove the company from the CMC List.”
Ma stressed that the Chinese Military Companies list is different from the Non-Specially Designated Nationals Chinese Military-Industrial Complex (NS-CMIC) list maintained by the US Treasury’s Office of Foreign Assets Control (OFAC), so an inclusion in the CMC List will not prohibit any persons from business dealings with Tencent.
Qui Mengyun, a partner at AllBright Law Offices, a Shanghai-based law firm, said although companies on the CMC List are not subject to financial sanctions and US export controls, they will face obstacles when bidding for some US government contracts.
She said there is a certain degree of overlap between the NS-CMIC List and the CMC List.
In the past, many companies on the CMC List were also sanctioned by the US Treasury and Commerce Department.
Those sanctioned by the US Treasury, such as Huawei Technologies, find it difficult to export their products to countries that settle trade in US dollars.
Those sanctioned by the Commerce Department, such as Dawning Information Industry Co (Sugon) and Semiconductor Manufacturing International Corp (SMIC), cannot obtain high-end machineries and parts from the United States. They either have to spin off their units or source US parts and materials via third parties or countries.
Yong Jian is a contributor to the Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.
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