Nasty decoupling act

In the waning days of the Biden administration, the US Department of Defense expanded its list of so-called "Chinese military companies" to include Tencent and Contemporary Amperex Technology (CATL), two of China's most valued companies.

The Pentagon's list may be short of the powerful impact of the Commerce Department's Entity List as the former specifies no sanctions, but is symbolic of a shift from Biden's "small yard, high fence" policy to include companies with products of potential military applications.

This could be a worrying shift since many of these products are commonly available in the market.

Unless the US could clearly explain how Tencent and CATL had been working with the PLA, almost all Chinese companies specialized in technology would be considered to be collaborating with the PLA and could be black-listed.

If the "small yard" had been confined to traditional military suppliers, the shift would suggest that this is no longer the case.

Biden's Democrats and Donald Trump's Republicans differ on nearly all domestic matters but agree with each other on China. As the "small yard" is enlarged to include more, an outstanding question is: will Trump take it even further?

The answer is almost certain - what is less certain is whether there will be a total decoupling.

The Pentagon's list is unfair to investors, and Tencent and CATL have refuted the assertion and pledged to challenge the decision.

Investors are sensitive and tend to act on instinct. The share price of Tencent, for example, continued to come under pressure yesterday, shedding a further of 2.74 percent.

CATL, a major Chinese battery maker, has yet to indicate whether its unexpected addition on to the Pentagon's list will have any impact on its plan to apply for secondary listing in Hong Kong, a strategic move by the company to raise capital to finance its global expansion.

Could the Biden administration be also trying to warn American fund managers to avoid investing in CATL's new issues?

Singapore's former ambassador to the United Nations Kishore Mahbubani pointed out in the Straits Times that the latest addition was unwise - and the ex-diplomat cannot be alone in this view.

Mahbubani believes the world will continue to rely on Chinese companies for products and the US will effectively decouple itself from the rest of the world if it tries to do so from Chinese companies.

Trump will be sworn into office on January 20. On the same day, Marco Rubio will take over from Antony Blinken as secretary of state - and bear in mind that Rubio was among the first congressmen to target CATL.

Perhaps what is less certain is how CATL's customers - like Elon Musk's Tesla, US car maker Ford and Germany's BMW - will react to the listing as CATL has been supplying these manufacturers with high-standard batteries.

It would be ironic if Musk - an active member of Trump's inner circle - continues to use CATL batteries to power Tesla electric vehicles.

It would be easier said than done to change suppliers as it is estimated that around one in three electric cars in the world are powered by CATL batteries.