Added to the CMC List, Removed from the Notorious Markets List: Two Dramatic Days for Tencent
Removal of WeChat from the Notorious Markets List may indicate that Tencent is not a key target of US crackdown
On January 6, the U.S. Department of Defense issued an announcement adding more than 100 Chinese companies to its Section 1260H list (the CMC list), covering fields such as aerospace, semiconductors, artificial intelligence, drones, information and communication technology, construction, energy, and biotechnology. Tencent received significant attention for being included on such a list for the first time.
On the morning of January 7, Tencent released a statement：
“It is clearly a mistake for Tencent to be included on this list. We are not a military enterprise or a military supplier. Unlike export controls or other measures, this list does not affect our business. Nevertheless, we will work with the relevant U.S. authorities to resolve any misunderstanding.”
That evening, Tencent issued another announcement, stating that the company had taken note of the DOD’s plan to issue a
“Notice on Designating Chinese Military Companies” on January 7, 2025 (U.S. time). According to this notice, the U.S. Deputy Secretary of Defense has placed the company on the list of Chinese military companies. Since Tencent is neither a Chinese military enterprise nor part of China’s military-civil fusion defense industry, the company believes including it on the list of Chinese military companies is erroneous.”
Tencent also noted that, unlike other lists maintained by the U.S. government for imposing sanctions or export controls, being placed on the list of Chinese military companies is related only to U.S. defense procurement matters and does not affect the group’s business.
“The Chinese military company list is also different from the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC List) maintained by the U.S. Office of Foreign Assets Control. Being included on the Chinese military company list does not prohibit anyone (except for the DOD) from doing business with the company, including trading its securities. Tencent intends to initiate a review process to correct this mistake. During this process, the company will discuss the matter with the DoD to resolve any misunderstanding and, if necessary, pursue litigation to have itself removed from the list of Chinese military companies.”
The CMC list was established by the DOD under Section 1260H of the National Defense Authorization Act (NDAA) for Fiscal Year 2021. The DOD and its contractors are prohibited from engaging in commercial, service, or technical cooperation with entities on the CMC list. However, the primary function of this list is “naming and shaming”.
On January 7, Chinese Foreign Ministry spokesperson Guo Jiakun strongly condemned the U.S. for “creating various discriminatory lists to unjustifiably suppress Chinese companies”, and stated that China would “take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises”.
Bloomberg reporter: The U.S. has added Tencent and battery manufacturer Contemporary Amperex Technology (CATL) to the blacklist. What is the Foreign Ministry’s comment on this?
Guo Jiakun: China has always firmly opposed the U.S. overgeneralizing the concept of national security by creating various discriminatory lists, unfairly suppressing Chinese enterprises, and hindering China’s high-quality development. The development rights of the Chinese people cannot be deprived nor ignored. We urge the U.S. to immediately correct its wrongdoing and lift its illegal unilateral sanctions and “long-arm jurisdiction” over Chinese companies. China will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies and protect its own lawful development rights.
The matter has generated widespread discussion in China. A nationalist blogger known as “Mingshu Zatan”（明叔杂谈） satirized the DoD’s move, calling it unprofessional and frivolous.
“The best interpretation of the DoD’s decision to include Tencent and other Chinese companies on the “military-related enterprises list” may be that some “makeshift group” within the DoD made a hasty and absurd decision before stepping down—one that professionals find laughable. In recent years, the DoD has published a “military-related enterprises list” annually, turning it into a “routine task.” Sometimes, even when it cannot “complete the task,” the DoD cobbles a list together after delays. This has led to highly unprofessional and unserious decision-making. Many believe that including Chinese companies that are obviously not “military-related” on the list is merely a way for the DoD to posture as being “tough on China.”
Although the DoD’s act of putting Tencent and other companies on the “military-related enterprises list” may be unprofessional and frivolous, it becomes a very serious matter if Tencent, as a publicly listed company, faces an overreaction from the market that unjustly harms its stock price. At this moment, all investors should take a deep breath, recognize the real intentions behind what this “makeshift group” at the DoD has done, and avoid panic-selling that might hurt Tencent “for no reason.” It is particularly worth noting that after the U.S. presidential election on November 5, 2024, the top leadership at the DoD will face a major reshuffle, so the “military-related enterprises list” published at this time might not represent the attitude of the incoming Trump administration.”
Another influential blogger, known as “Fuchengmen No. 6,”（阜成门六号院） pointed out that Tencent’s inclusion on the CMC list should not be called a “sanction,” because only the Treasury Department’s SDN list constitutes a sanction in the strictest sense.
“From the perspective of international law, many believe that only the Treasury Department’s SDN list qualifies as a sanction, given that its fundamental goal is to restrict the existence of the entities on the list. In contrast, the Commerce Department’s trade restrictions do not, strictly speaking, constitute sanctions because they do not constrain a company’s general business activities and may not affect its normal development. Companies from adversarial nations—as well as from Switzerland, the U.K., Canada, the Netherlands, and Ireland—are on the Commerce Department’s export control lists, reflecting the U.S. government’s increasing use of these lists as a means of maintaining its advantage in international economic competition.”
Well-known political commentator “Niutanqin”（牛弹琴） remarked that the DoD’s labeling of Tencent as a military company is “astonishing”.
“Tencent is a software company; when did it start dealing in arms? Tencent’s response made three points clear:
It is an error—Tencent has no ties to the military.
It is not a sanction, so Tencent’s operations are unaffected.
Since reputation is involved, Tencent still wants to address the misunderstanding.”
However, events took a dramatic turn on January 8. The Office of the United States Trade Representative (USTR) released the 2024 Review of Notorious Markets for Counterfeiting and Piracy. While several Chinese internet products remain on the list, notably Tencent’s WeChat—which had previously been listed—was removed this time.
Scholars have pointed out that the “Notorious Markets List” is intended to identify large-scale online and physical markets engaged in piracy and trademark counterfeiting. In practice, however, it has often served as a tool to target well-known Chinese enterprises and their products. Tencent had repeatedly opposed WeChat’s inclusion on this list, emphasizing to the USTR that the company has long been a global leader in supporting robust intellectual property systems, has heavily invested in IP protection, and collaborates with partners around the world to advance intellectual property rights.
Observers believe that the U.S. is currently undergoing a complicated political transition, with various agencies releasing different lists that reflect competing policy narratives, resulting in seemingly arbitrary logic. Compared with the CMC list issued just a day earlier by the Department of Defense—which lacks substantive punitive measures and serves more as a stigmatizing mechanism—the Notorious Markets List, backed by the President’s Office, has a broader and more comprehensive agenda.
The removal of Tencent’s WeChat from the Notorious Markets List may indicate, to some extent, that the DoD’s inclusion of Tencent on the CMC list is an isolated incident, and that Tencent is not a key target of sanctions by the U.S. government—at least not in a systematic, “whole-of-government” manner. For Tencent and its investors, this certainly qualifies as good news.
The s1260H / CMC list issue is quite amusing. The biggest function of the CMC list is to limit DOD's ability to directly pay for services with said company. Even secondary payment ie through a contractor is acceptable under this legislation.
Quite a poorly discussed topic within the reporting and even investment community. The legal reach of the law is important to understand.
The context of this law is that it's been around for decades, with Trump recently utilising it in his first term. Recall a few interesting things:
1 - the DOD itself "forgot" to update the list annually as required by the legislation. It tells you how (un)serious this piece of legislation is.
2 - Xiaomi managed to get itself off he list before.
3 - In the judgement, it was noted that the DOD cannot overreach versus the powers provided under the law. That is, it cannot whimsically assign companies under this designation. The definition of what is associated with Chinese military is uncertain in that regard, but the previous arguments put forward by the DOD were rejected as a whole such as that the founder of Xiaomi received an award from the Chinese government.
4 - Note that this is still in lower courts and not contested at higher levels and hence legal certainty is still low.
5 - Finally, a lot of online commentators on the Chinese side fail to understand how American government operates. They extrapolate the coordination ability of the Chinese government. This is an overly generous assumption.