U.S. banks are preparing to underwrite a more-than-$5 billion Hong Kong IPO for CATL — even after the Pentagon added the Chinese battery giant to its 1260H list. Top U.S. investment banks, including J.P. Morgan and Bank of America, have signed on as underwriters; both received letters from the U.S. House Select Committee on the Chinese Communist Party in April 2025 asking why they're participating. The move highlights a growing tension for global banks as Washington tightens defence-related rules that could complicate large China deals.

Big deal, big banks CATL has filed paperwork for a Hong Kong initial public offering that market sources expect to top $5 billion, making it one of the biggest listings the city has seen in recent years. Top U.S. investment banks are lined up to underwrite the offering. Two of those banks — J.P. Morgan and Bank of America — received letters in April 2025 from the U.S. House Select Committee on the Chinese Communist Party asking why they are participating in the flotation. The committee’s letters underscore a new tension for global banks: balancing lucrative underwriting mandates with rising political scrutiny in Washington, as the U.S. expands legal and policy tools aimed at limiting defence exposure to Chinese firms. Washington's policy moves The immediate trigger for the letters was the Department of Defense’s decision to add CATL to its 1260H list of Chinese Military Companies. The DoD began publishing that list in June 2021 and it has grown substantially since. Legislative changes in the 2024 National Defense Authorization Act added concrete restrictions tied to the list. Beginning in 2026, the Pentagon will be barred from doing business with firms on the 1260H roster. In 2027, the act extends restrictions to purchases of products that include components made by firms on the list. The NDAA also includes a provision that specifically targets batteries: in 2027 the Pentagon will be unable to buy batteries made by CATL and five other Chinese companies, including BYD and Gotion High‑Tech. How officials and advisers see it - Nazak Nikakhtar, who served at the Commerce Department during the first Trump administration, said the 1260H list "has marginal effects on its intended purposes" but has amplified national security concerns tied to China. - Career civil servants in the Pentagon’s acquisitions and sustainment office have driven additions to the list with the stated aim of steering the military away from certain suppliers; that office is separate from political processes that could sharpen the list’s public impact. - Gabriel Wildau, managing director at advisory firm Teneo, advised market participants that any U.S. company involved with a listed firm should plan for scenarios in which procurement rules and public politics affect contracts and reputations. Market and underwriting implications Underwriting a $5 billion Hong Kong listing offers substantial fees and helps U.S. banks maintain client relationships and deal flow in Asia. But the House committee letters show there is a near-term political cost to that business choice. Mechanically, the Hong Kong listing process continues: a filing naming coordinators has already been submitted to the exchange. Still, the political spotlight could force banks to re-examine disclosures, client lists and public relations strategies on large cross-border transactions. So far, the DoD’s 1260H regime has mainly functioned as a tool for the Pentagon to avoid listed suppliers, but Congress has strengthened the list’s potential consequences.

Related Articles

Key dates are already set: the 2024 National Defense Authorization Act bars the Pentagon from doing business with firms on the 1260H list starting in 2026, and in 2027 it specifically blocks purchases of batteries made by CATL and five other Chinese companies.

This article was created with AI assistance.