S&P Global — 15 January 2025
Daily Update: January 15, 2025
US Blacklists Chinese Companies in Potential Escalation
By Nathan Hunt
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Even before President-elect Donald Trump's inauguration, China and the US appear to be anticipating greater trade friction. The US Defense Department has added several Chinese companies to a list maintained under the National Defense Authorization Act, which requires the US secretary of defense to annually identify and publish a list of Chinese military companies. While inclusion on the list does not necessarily incur any US government penalties, it discourages US companies from working with those entities.
Among those included for the first time on this year’s Pentagon blacklist are shipping company COSCO, technology giant Tencent, battery manufacturer Contemporary Amperex Technology Co. Ltd (CATL) and the China National Offshore Oil Corp.'s international oil trading arm. According to market participants, blacklisted companies may face impacts similar to Chinese technology company Huawei, including higher operational costs, compliance issues and reputational damage.
According to S&P Global Commodity Insights, market participants were surprised to see some of the names on this year’s list. COSCO is one of the world's largest shipping companies and operates a large fleet of oil and gas/LNG tankers. Among its fleet of 1,417 ships, COSCO has 229 ships in its tanker fleet and 85 LNG ships. The Defense Department's blacklisting could result in higher shipping rates for large oil tankers, market participants suggested. COSCO has not commented on its listing as a Chinese military company.
Tencent and CATL have called their inclusion on the list a “mistake,” according to S&P Global Commodity Insights. "Tencent's inclusion on this list is clearly a mistake. We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding," a Tencent spokesperson said.
While the motivation for adding these companies to the blacklist is unclear, China appears to be making policy moves that could position it to weather a period of worsening trade relations with the US. China slashed its clean oil product export tax rebates from 13% to 9% on Dec. 1, 2024, a move that could lay the groundwork for potential trade talks with the US. In addition, China has recently adopted a looser monetary policy, which could drive domestic demand and help China navigate potential trade tensions with the US.
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