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 ignite tensions with Beijing days before the US president – elected Joe Biden takes office.
Defense department officials, who oversee the nomination, have not yet finalized plans to add the companies and are also discussing the addition of other Chinese businesses, sources said on condition of anonymity because the deliberations are private. is.
If added, Alibaba and Tencent will be subject to an executive order signed by US President Donald Trump in November, banning US investors from launching shares of blacklisted companies from November 2021.
Tencent declined to comment and Alibaba did not immediately respond to a request for comment. The discussions were first reported by the Wall Street Journal.
The shares in Alibaba Group Holding Ltd fell by 5% in the morning trading on the Hong Kong Stock Exchange. Tencent Holdings Ltd’s shares fell by 3%. Alibaba’s US listed shares closed just over 5% on Wednesday.
During his languishing days in the White House, Trump unleashed a series of tough measures against Chinese enterprises as he tried to capture his hard-earned legacy and as Beijing and Washington clashed over the coronavirus and Chinese repression of Hong Kong.
US President Donald Trump on Tuesday signed an executive order banning transactions with eight Chinese software applications, including the Alipay payment app from Ant Group and QQ Wallet and WeChat Pay from Tencent Holdings Ltd.
However, some investors have expressed skepticism that Tencent and Alibaba would experience long-term ownership restrictions in the US.
“These are private companies that are widely owned, primarily by US and international investors,” said Brendan Ahern, chief investment officer of Krane Funds Advisors.
The November executive order sought to give teeth to a 1999 law that instructed the Department of Defense to compile a list of Chinese companies considered or owned by the Chinese military.
The Pentagon, which only met the mandate last year, has so far blacklisted 35 companies, including China’s leading record maker SMIC and oil giant CNOOC.
While the release of the November directive has led index providers like MSCI to start removing companies on the blacklist from their indices, confusion over the scope of the rules over the past few days has caused some dramatic flip-flops by the New York Stock Exchange.
The NYSE originally announced plans on December 31 to include China Mobile Ltd, China Telecom Corp Ltd and China Unicom Hong Kong Ltd. To remove, Monday took a turn after consulting regulators in connection with the U.S. Treasury’s Office of Foreign Asset Control. and decided to keep them listed. On Wednesday, he said it would return to the original plan.
S&P Dow Jones indices followed the NYSE and said late Wednesday they would remove the U.S. Depositary Receipts (ADRs) from these three telecommunications companies.
Reporting by Munsif Vengattil, Kanishka Singh and Bhargav Acharya in Bengaluru, Andrea Shalal and Alexandra Alper in Washington, Ross Kerber in Boston; Writing by Sayantani Ghosh; Edited by Edwina Gibbs