8JANUARY, 2O25CATL AND TENCENT'S LATEST MILITARY ASSOCIATED DESIGNATION SPARKS FRENZYASIA'S MANUFACTURING SECTOR PEAKS AFTER THREE YEARSThe U.S. Department of Defense announced on Monday, January 6, that it had added several prominent Chinese technology companies, including Tencent Holdings, CATL, and others, to its "Section 1260H list," which identifies firms alleged to have links to China's military. The list, updated annually and mandated under U.S. law, now includes 134 companies, according to a notice in the Federal Register.Among the newly designated companies are Tencent, a leader in gaming and social media and the parent of WeChat, as well as CATL, the world's largest electric vehicle battery manufacturer. Other notable additions include chipmaker Changxin Memory Technologies, telecommunications firm Quectel Wireless, and drone manufacturer Autel Robotics.The designation has sparked significant market reactions. Tencent's Hong Kong-listed shares plunged up to 7 percent in early trading, and its U.S.-traded shares fell 8 percent in over-the-counter trading. CATL's Shenzhen-listed shares dropped over 5 percent, and Quectel's stock fell nearly 7 percent.Tencent responded to the designation by calling it "clearly a mistake" and asserted that it is neither a military company nor supplier. "Unlike sanctions or export controls, this listing has no impact on our business," the company added in a statement. Similarly, CATL denied any military involvement, emphasizing that it is not engaged in any military-related activities. A Quectel spokesperson also denied ties to any military and indicated plans to request a reconsideration of the designation.The other companies listed, as well as the Chinese embassy in Washington, have not yet commented on the matter. The Pentagon's list is part of broader U.S. efforts to scrutinize Chinese companies over perceived national security risks and alleged ties to China's military. Asia's manufacturing sector experienced a significant resurgence in November 2024, with procurement activity reaching its highest growth rate in three and a half years, according to S&P Global. The GEP Global Supply Chain Volatility Index highlighted that China and India spearheaded this rebound, as manufacturers increased production to meet heightened demand spurred by domestic stimulus efforts and rising export orders.China's manufacturing activity was primarily concentrated on automotive and technology products, while India recorded the region's largest surge in raw material purchases. This uptick underscores the robust economic activity in both countries and their pivotal roles in driving the regional supply chain's recovery.Reflecting this momentum, Asia's supply chain capacity index rose to 0.15, signaling stretched capacity for the first time since mid-2024. This indicates heightened operational demand across the region, with manufacturers actively stockpiling and preparing for potential shifts in trade policies, particularly tariffs, under the Trump administration.S&P Global attributes the manufacturing boom to a combination of surging orders and strategic adjustments by businesses. These proactive measures underscore the agility of Asia's manufacturers in navigating dynamic global trade conditions and positioning themselves for sustained growth. TOP STORIES
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