The US Department of Defense has added Chinese messaging and gaming Tencent to its list of “Chinese military company”, a designation that won’t necessarily result in a ban but is nonetheless unpleasant.

Tencent appeared in a Tuesday update to the “Section 1260 list”, a document that US law requires be compiled annually to list companies operating in the USA that Washington wonks believe participate in China’s “Military-Civil Fusion strategy”, under which the People’s Liberation Army (PLA) works with local companies to ensure it can get the technologies it needs to modernize and defend the People’s Republic.

The updated version of the list doesn’t explain why Tencent was added, and the company has said its inclusion must be an error and that it will appeal its inclusion.

However, it’s not hard to see how China’s military could rely on Tencent, whose WeChat messaging platform and related payment service are both utterly ubiquitous in Chinese daily life. WeChat is also thought to be a key channel Beijing uses to deliver its desired messages to the Chinese diaspora. An Australian Senate committee has recommended WeChat be banned from use on government-owned devices as it can be used to gather intelligence about users. Canada went a step further and banned the app from government kit. Tencent also operates a public cloud, an enterprise-grade collaboration environment called VooV, and security-as-a-service offerings that resemble those delivered by Cloudflare. The PLA could use any or all of the above.

Also added to the list is CATL, a battery maker that supplies the likes of Tesla, Ford, and BMW.

As explained [PDF] by law firm Squire Patton Boggs, inclusion on the 1260 list doesn’t have the same consequences as being added to the “entity list” of orgs not allowed to deal with US businesses unless Washington issues a license allowing it.

But inclusion on the 1260 list does mean the Department of Defense can’t work with named companies. Squire Patton Boggs also notes that “members of Congress have referenced the list to enact restrictions against listed companies, and, in some cases, against subsidiaries as well.”

The firm has also observed that some orgs choose to stop working with companies on the 1260 list, which can make for supply chain problems.

CATL’s ties to Tesla could therefore become problematic. Microsoft could also face an awkward moment, as a Tencent company develops a mobile version of the game Call of Duty which it acquired along with Activision Blizzard.

A consumer backlash is another possibility, as Tencent has a stake in hit games including PUBG and Fortnite – and its publisher Epic Games, which has fought to decrease the market power of Apple and Google, an outcome Beijing would not mind one bit!

It’s also conceivable that the US could act against WeChat, perhaps an easier target than TikTok as it’s not as widely used stateside.

Chinese authorities have told the BBC the listing is a violation of international norms that will undermine foreign investors’ confidence. ®