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, said two people familiar with the matter – a move that Tensions with Beijing could flare up days before US President – Select Joe Biden to take office.
Defense ministry officials overseeing the denominations have not yet finalized plans to add the companies and are also discussing adding other Chinese companies, the sources said, who spoke on condition of anonymity as the deliberations were private. to be.
If added, Alibaba and Tencent would be subject to an executive order signed in November by US President Donald Trump that prohibits US investors from buying shares of the blacklisted companies from 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% during morning trading on the Hong Kong Stock Exchange. Shares of Tencent Holdings Ltd fell 3%. Alibaba’s US-listed shares closed just over 5% on the news on Wednesday.
Trump has taken a slew of tough measures against Chinese companies in his waning days at the White House as he tries to bolster his tough legacy and as Beijing and Washington clash over the coronavirus and Chinese crackdown on Hong Kong.
On Tuesday, US President Donald Trump signed an executive order to ban transactions with eight Chinese software applications, including Ant Group’s Alipay mobile payments app and Tencent Holdings Ltd.’s QQ Wallet and WeChat Pay.
But some investors expressed skepticism that the Tencent and Alibaba would come under protracted US ownership restrictions.
“These are private companies largely owned by primarily US and international investors,” said Brendan Ahern, Chief Investment Officer of Krane Funds Advisors.
The November executive order was designed to dig teeth into a 1999 law that instructed the Defense Ministry to list Chinese companies deemed owned or controlled by the Chinese military.
The Pentagon, which only fulfilled the mandate last year, has blacklisted 35 companies so far, including China’s top chip maker SMIC and oil giant CNOOC.
While the November guideline’s publication prompted index providers like MSCI to blacklist companies from their indexes, confusion over the scope of the rules has caused some dramatic flip-flops at the New York Stock Exchange in recent days.
The NYSE originally announced plans on December 31 to acquire China Mobile Ltd, China Telecom Corp Ltd and China Unicom Hong Kong Ltd. to be deleted. Things turned around Monday after consulting with regulators related to the US Treasury’s Office of Foreign Assets Control. and decided to keep them on the list. On Wednesday it said it will revert to the original plan.
S&P Dow Jones Indices have tracked the NYSE and said late Wednesday that it will remove American Depositary Receipts (ADRs) from these three telecom companies.
Reporting by Munsif Vengattil, Kanishka Singh and Bhargav Acharya in Bengaluru, Andrea Shalal and Alexandra Alper in Washington, Ross Kerber in Boston; Written by Sayantani Ghosh; Editing by Edwina Gibbs