The United States considers adding Alibaba, Tencent to China’s stock ban

The departments debated with the Treasury Department whether the addition of these firms could have broad ramifications in the capital markets, people said. The plan is still under deliberation and may not pass as agencies debate its impact on markets, people added.

Tencent and Alibaba are the most valuable listed companies in China, with a combined market capitalization of over $ 1.3 trillion, and their shares are owned by dozens of US mutual funds and other investors. If adopted, the measure would be a major escalation of the Trump administration out of its efforts to develop US investor holdings in large Chinese companies.

The Trump administration has stepped up its efforts to sanction Chinese companies in its last days. On Wednesday, the New York Stock Exchange said it would move to eliminate China’s top three telecom operators, following a previous decision to drop the plan after receiving “new specific guidance” from the Treasury Department.

On Tuesday, President Trump signed an order banning American individuals and companies from trading in eight Chinese software applications, including Alipay, Alibaba subsidiary, Alipay and Tencent’s WeChat Pay. The order comes into force 45 days after the inauguration of President-elect Joe Biden.

Alibaba and Tencent are being tracked by major indexes, including those created by MSCI Inc.

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

In the last weeks of Trump’s presidency, US government officials have clashed over the scope of the list of companies outside the borders of American investors. Pentagon and state officials have pushed for a broad-based list of high-profile companies and subsidiaries of already-named Chinese companies. The agencies called for a tougher line to restrict China’s military and security services’ access to data, advanced technology and expertise. The Treasury, fearing that the forced sale could affect the financial market, wants a narrower list.

The Pentagon, the main agency that manages the list, had no immediate comment. The State Department and the Treasury Department had no immediate comment.

An Alibaba spokeswoman did not respond to requests for comment. A Tencent spokesman declined to comment.

China’s Ministry of Commerce did not respond to a request sent outside the working hours, and the Chinese embassy in the US referred to a December Foreign Ministry comment saying that “China strongly opposes the non-suppression of Chinese companies.” by the United States “And” the Chinese government will continue to protect the legitimate and legal rights and interests of Chinese companies. “

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

Several Chinese technology companies have raised tens of billions of dollars from US and international investors in recent years, allowing foreign investors to capitalize on China’s rapidly growing economy.

Alibaba and Tencent were among the main components of the MSCI Emerging Markets index, representing a combined share of 11% as of December 31. Similarly, the two claimed a 12% share in the emerging FTSE index as of December 31.

Following the November list, the Pentagon expanded its list of banned companies in December to include companies such as China’s largest chip maker Semiconductor Manufacturing International. Body.

and major oil China National Offshore Oil Corp.

August’s State Department says US faces threats from cloud-based systems run by Alibaba, Tencent and Baidu Inc.

U.S. officials have become increasingly concerned in recent weeks as Alibaba and Ant are under heavy scrutiny at home, further putting them at the mercy of Beijing, according to someone familiar with the matter.

The Chinese government has tightened the grips on its technology champions recently, revealing extensive antitrust regulation targeting the country’s largest Internet platforms, launching an investigation into Alibaba and eliminating Ant’s initial successful public offering.

In the latest episode, Chinese regulators are trying to get Ant to share data on consumer loans he has accumulated with the central bank’s credit reporting system, The Wall Street Journal reported.

Tencent operates the hugely popular WeChat application, which has become one of the most powerful tools in Beijing’s arsenal of tools for monitoring the public. Tencent also holds stakes in several US video game companies.

Major US asset managers, including T. Rowe Price Group Inc.,

Black stone Inc.

and Vanguard Group are among the main public shareholders of Alibaba and Tencent through funds, according to FactSet data.

Asset managers are lobbying to prevent a situation where companies like Alibaba could go blacklisted, said a person familiar with large financial firms’ conversations with US regulators.

Last week, the Treasury Department issued guidelines that include banned subsidiaries if a listed company owns 50% or more of them. Derivatives, bonds and receipts of the depositary, as well as exchange traded funds, indexed funds and mutual funds that hold securities issued by these entities in any jurisdiction will also be limited to US investors.

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