WASHINGTON (Reuters) – The Trump administration is considering adding technology giants Alibaba and Tencent to a blacklist of companies allegedly owned or controlled by the Chinese military, two people familiar with the matter said, a move that could inflame tensions with Beijing days before US President -Select Joe Biden to take office.
Defense Department officials, who oversee the appointments, have not yet finalized plans to add the companies and are also discussing the possibility of adding other Chinese companies, sources said, on condition of anonymity because the deliberations they are private.
If added, Alibaba and Tencent would be subject to an executive order signed by U.S. President Donald Trump in November that bans U.S. investors from buying shares of blacklisted companies as of November 2021.
Tencent declined to comment and Alibaba did not immediately respond to requests for comment. The discussions were first reported by the Wall Street Journal.
Shares of Alibaba Group Holding Ltd fell 5% in morning trading on the Hong Kong Stock Exchange. Shares of Tencent Holdings Ltd fell 3%. Shares in the United States of Alibaba closed just over 5% on Wednesday.
Trump has unleashed a series of harsh measures against Chinese companies during his dwindling days in the White House as he tries to consolidate his tough legacy and while Beijing and Washington have clashed over coronavirus and Chinese repression in Hong Kong.
On Tuesday, U.S. President Donald Trump signed an executive order banning transactions with eight Chinese software applications, including Ant Group’s Alipay mobile payment application and Tencent Holdings Ltd.’s QQ Wallet and WeChat Pay.
But some investors expressed skepticism that Tencent and Alibaba would go under US long-term ownership restrictions.
“They are privately held companies that are wholly owned, primarily by U.S. and global investors,” said Brendan Ahern, investment director at Krane Funds Advisors.
The November executive order sought to give teeth to a 1999 law that mandated the Department of Defense to compile a list of Chinese companies that are considered the property or control of the Chinese military.
The Pentagon, which only served the mandate last year, has blacklisted 35 companies, including China’s largest chip maker SMIC and oil giant CNOOC.
Although the launch of the November directive caused index providers such as MSCI to begin removing companies from the blacklist of their indexes, confusion over the scope of the rules caused some dramatic stock market flip-flops. of New York in recent days.
The NYSE originally announced on December 31 plans to withdraw China Mobile Ltd, China Telecom Corp Ltd and China Unicom Hong Kong Ltd. On Monday he made a change of direction after consulting with regulators regarding the U.S. Treasury’s Office of Foreign Asset Control. and decided to keep them on the list. Wednesday said it would return to the original plan.
S&P Dow Jones Indices has followed the NYSE and said Wednesday afternoon that it will withdraw U.S. depository receipts (ADRs) from these three telecommunications companies.
Reports of Munsif Vengattil, Kanishka Singh and Bhargav Acharya in Bengaluru, Andrea Shalal and Alexandra Alper in Washington, Ross Kerber in Boston; Written by Sayantani Ghosh; Edited by Edwina Gibbs