CATL and Tencent banned! What it really means
And what happens next...
In the last 24 hours, the Department of Defense has designated a myriad of Chinese firms as “Chinese military companies,” you can find the announcement and list here, and related news articles: NYT, WSJ, FT, Xinhua
What it means
Reputationally a lot, other than that, very little.
1: The designation assumes a company on the list has a connection to the Chinese military, and discourages US and Western firms from doing business with these Chinese firms due to an element of risk associated with them.
2: This designation doesn’t have specific sanctions or formal restrictions tied to it.
Next steps
1: Expect appeals by Tencent, CATL, and other’s, similar to Xiaomi’s sucessful appeal in 2021. Xiaomi gave a roadmap for how to appeal and win, expect these firms to do the same.
2: US & Western firms that do business will likely stop, or slow down, anything with firms on the list regardless of relationship.
3: Chinese firms will be reviewing and looking at why firms were put on this list, and how to stay off it.
4: Some Chinese firms may choose to ignore this, and align more closely with the Chinese side over doing international business.
What about the future?
1: CATL is a major supplier to Tesla and other US and Western companies, if they are sanctioned it would create major issues in EV and other supply chains. They will be pushing heavily to be taken off (and it will be interesting to see Tesla’s and Elon’s role, if any, in the process).
2: This is more of the same in a tit-for-tat between both the US and China. Expect more restrictions from both sides and an ever-growing large yard and higher fence.
3: Expect US lawmakers, and an incoming Trump Administation, to put more pressure on the Department of Defense, The Commerce Department, USTR, and The Treasury Department to “do something” to further slow Chinese progress in technology, supply chains, raw material processing, talent, and infrastructure development.