Cosco and CIMC put on US Defense Department sanctions list
Sanctions likely to be seen as yet another escalation in the continued US-China power struggle, only days before Donald Trump is to assume office in the White House
Key Chinese state-owned shipping firm Cosco and container manufacturer CIMC have been added to the US Defense Department’s sanctions list along with over 130 other Chinese companies for alleged military links, facing restrictions on US business dealings
STATE-owned shipping conglomerate China Cosco Shipping Corp and container manufacturing giant China International Marine Containers (Group) have been placed on the US Department of Defense’s sanctions list for alleged links to the Chinese military.
The purpose of the list, now containing a total of 134 companies, is to restrict their economic and technological interactions with the US and curb China’s military modernisation efforts.
The list under Article 1260H of the National Defense Authorization Act 2021 (NDAA) is updated annually.
Cosco Shipping and two of its subsidiaries, Cosco Shipping (North America) and Cosco Shipping Finance Co, as well as CIMC, were among dozens of other Chinese firms that were the latest batch sanctioned by the Defense Department.
Other prominent Chinese companies designated this time include oil and gas major China National Offshore Oil Corporation, gaming firm Tencent and world’s number one battery producer CATL.
They will face restrictions including loss of access to US government markets.
Additionally, being labelled as “linked to the Chinese military” could potentially damage these companies’ reputations internationally, raising concerns among customers and partners. However, it will not directly impact their commercial operations, including trading with US companies.
State shipbuilding behemoth China State Shipbuilding Corp, which was already put on the Defense Department’s list from previous sanctions, has not seen its business significantly affected amid a continued ordering boom, for example.
Share prices of Cosco Shipping’s two most important listed companies, Cosco Shipping Holdings and Cosco Shipping Energy Transportation, dropped 3.3% and 1.6%, respectively in Hong Kong today. Their Shanghai-listed stocks fell relatively narrowly.
CIMC’s Shenzhen and Hong Kong-listed shares dipped less than 1%.
In response to being placed on the US Department of Defense’s sanctions list, Cosco Shipping said that it had noted the inclusion adding in a statement that the company and its subsidiaries "have consistently adhered to local laws and regulations, maintaining strict compliance in all international operations".
"We remain committed to facilitating global trade and providing high-quality commercial shipping and logistics services to clients worldwide, including agricultural producers, manufacturers, energy firms, retailers, and exporters in the US," the statement continued.
Cosco Shipping emphasised that the company and none of its subsidiaries are “Chinese military companies”.
The Chinese group said that it will engage with US authorities to clarify the matter, while reiterating that the designation does not impose sanctions or export controls. Cosco Shipping said its "global operations will continue uninterrupted".
The development could be seen as yet another escalation in the tug-of-war between the two superpowers, as Donald Trump is about to move into the White House.
Notably, a Cosco tanker subsidiary and one of its crew management units were sanctioned in 2019 by the US Office of Foreign Assets Control for alleged involvement in transporting Iranian oil during Trump’s first term. The tanker company’s sanctions were later revoked.
Cosco Shipping is the world’s largest shipping company by fleet size, operating over 1,400 vessels globally. It controls the world’s biggest dry bulk and oil tanker fleets as well as the fourth largest container shipping fleet. The group is also a leading player in port operations and shipbuilding.
The UK-based think tank, Council on Geostrategy, stated in a research report published last May that although Cosco Shipping operates in the civilian business sector, its extensive network of ports and logistics could potentially be utilised by the Chinese People’s Liberation Army Navy to expand its overseas presence.
“Even though it does not have a network of military bases, the PLAN can count on replenishment support via Cosco at virtually every major port in the Indo-Pacific,” the report said.
CIMC is the world’s top container manufacturer. Its business also includes road transportation vehicles, energy and chemical equipment, and marine engineering.
Cosco Shipping and CIMC have been approached for comments.
