US considers adding Alibaba, Tencent to China’s share ban

The people said that the departments had debated with the department of treasury whether the addition of these enterprises could have major consequences for capital markets. The plan is still being discussed and may not go through if agencies discuss its impact on markets, the people added.

Tencent and Alibaba are China’s two most valuable listed companies with a combined market capitalization of more than $ 1.3 billion, and their shares are held by numerous US investment funds and other investors. If executed, the move would be a major increase in the Trump administration over its efforts to divert US investors’ interest in large Chinese companies.

The Trump administration has intensified efforts in recent days to sanction Chinese companies. The New York Stock Exchange said on Wednesday that it continues to delist China’s three largest telecommunications carriers, returning to an earlier decision to scrap the plan after receiving new specific guidance from the Treasury Department.

President Trump on Tuesday signed an order banning U.S. individuals and companies from trading in eight Chinese software programs, including Alibaba subsidiary Ant Group Co., Alipay and Tencent’s WeChat Pay. The order comes into effect within 45 days after the inauguration of Elected President Joe Biden.

Alibaba and Tencent are followed by key indexes, including those created by MSCI Inc.

and FTSE Russell. Alibaba, which is listed in New York and Hong Kong, and Tencent, which is listed in Hong Kong, are heavyweights in global stock indices that are widely followed. Like most foreign companies, the shares are not included in the Nasdaq Composite, S&P 500 or Dow Jones Industrial Average.

In the last few weeks of the Trump presidency, U.S. government officials have clashed over the scope of the list of companies that are extraordinarily limited to U.S. investors. Pentagon and state officials insisted on a wide-ranging list that includes high-profile companies and subsidiaries of already-listed companies in China. The agencies have called for a stricter line to restrict China’s military and security services’ access to data trove, advanced technology and expertise. The Treasury, for fear that forced sales could push up financial markets, wants a narrower list.

The Pentagon, the main agency that manages the list, did not immediately comment. The Department of Foreign Affairs and the Treasury did not immediately comment.

An Alibaba spokesman did not respond to a request for comment. A Tencent spokesman declined to comment.

The Chinese Ministry of Commerce did not respond to a request sent outside office hours, and the Chinese embassy in the United States referred to a statement from the Foreign Ministry in December saying: ‘China is strongly against the oppression of Chinese companies by the United States. , ”And“ the Chinese government will continue to protect Chinese legitimate and legitimate rights and interests of Chinese enterprises. ”

Alibaba and Tencent are not controlled by the Chinese government, but the State Department and the Pentagon have long said they fear the companies could be forced to share sensitive data about U.S. citizens and businesses with the Chinese government and as a channel to serve Beijing. to expand its influence.

Several Chinese technology companies have raised tens of billions of dollars from US and international investors over the past few years, enabling foreign investors to capitalize on China’s fast-growing economy.

Alibaba and Tencent are among the best ingredients in the MSCI Emerging Markets Index, and on December 31 together weighed 11%.

Following the November list, the Pentagon expanded its list of banned companies in December to include companies such as China’s leading chipmaker Semiconductor Manufacturing International. Corp.

and the large China National Offshore Oil Corp.

The State Department said in August that the US should address the threats of cloud-based systems managed by Alibaba, Tencent and Baidu. Inc.

U.S. officials have become increasingly concerned over the past few weeks as Alibaba and Ant come under scrutiny at home and put themselves further at the mercy of Beijing, according to one of the people familiar with the matter.

The Chinese government recently tightened its technology champions’ screws by launching a comprehensive antitrust regulation targeting the country’s largest internet platforms, launching an investigation into Alibaba and rejecting Ant’s initial public offering to Ant.

In the latest installment, Chinese regulators are trying to get Ant to share the customers of consumer credit data he has accrued with the central bank’s credit reporting system, reports The Wall Street Journal.

Tencent operates the hugely popular WeChat app, which has become one of the most powerful tools in Beijing’s arsenal of tools to monitor the public. Tencent also owns interests in several U.S. video game companies.

Major U.S. asset managers, including T. Rowe Price Group Inc.,

BlackRock Inc.

According to FactSet, Vanguard Group is among the largest public shareholders in Alibaba and Tencent among funds.

Asset managers are working to prevent a situation in which companies like Alibaba could be blacklisted, a person familiar with major financial companies’ talks with US regulators said.

Last week, the Treasury Department published guidelines that include subsidiaries in the ban if a company named on the list owns 50% or more of it. Derivatives, bonds and deposit receipts, as well as exchange traded funds, index funds and mutual funds issued by these entities in any jurisdiction, will also be restricted to US investors.

Write to Dawn Lim at [email protected], Jing Yang at [email protected] and Gordon Lubold at [email protected]