JPMorgan and Bank of America executives have pushed back against U.S. lawmakers’ requests to withdraw from underwriting a $4 billion IPO for the electric vehicle company CATL, which is based in Hong Kong and has been linked to Beijing’s military.
Officials from China’s House Selection Committee have reportedly communicated with Jamie Dimon, the CEO of JPMorgan, urging him to bow out from the recruitment related to CATL.
While CATL is recognized as a leader in electric battery production, some lawmakers express concerns that the company’s activities could further China’s military ambitions.
This situation complicates things for JPMorgan and Bank of America, as they plan to continue their involvement in underwriting, raising potential conflicts with the committee when shares are offered to the public.
The committee has requested clarification on why these banks should proceed with underwriting, but sources indicate they have yet to receive a response.
“The American public deserves transparency regarding why U.S. financial institutions support businesses linked to our adversaries,” a spokesperson for the committee remarked.
It’s disappointing, really. Bank of America and JPMorgan are appearing slow to respond to the committee, yet they persist in backing the IPO of companies flagged by the Department of Defense.
One possible motive behind this could be financial gain. Both banks are primary underwriters for CATL, which is also known as Hyundai Amperex Technology Co. Limited, and stand to earn a substantial portion of an underwriting fee that could reach about $240 million upon completion of the transaction.
A spokesperson for JPMorgan did not refute the discussion with Dimon but opted to refrain from providing further comments. Similarly, a representative from Bank of America remained tight-lipped.
The committee, formally known as the U.S. House Selection Committee on Strategic Competition between the U.S. and the Communist Party of China, has expressed concerns that banks are prioritizing profits over national security by financially backing businesses associated with China’s military objectives.
In correspondence addressed to Dimon and Bank of America’s CEO Brian Moynihan, the committee categorized CATL as “a Chinese military company designated by the U.S. Department of Defense.” They warned that proceeding with the IPO underwriting could inadvertently endorse practices related to human rights violations and threats to U.S. servicemen.
In defense, bank representatives argue that CATL is not listed on any government prohibition lists, thus complying with U.S. regulations when engaging with foreign businesses. They also noted that CATL’s operations include producing batteries for electric vehicles used by various American companies.
A spokesperson for CATL refuted the committee’s claims, asserting that they are not involved in military-related enterprises and that their lithium-ion batteries do not serve military purposes.
The company further articulated that it has no ties to any entity involved in forced labor, which the committee cited as a connection to its operations.
It’s not entirely clear whether the White House is working in tandem with skeptical lawmakers regarding trade negotiations with China, but their discontent with CATL’s rebuttals is evident. The committee has stated that efforts to deny CATL’s military connections are contradicted by existing public reports and called for transparency regarding their supply chains and operations.
Recently, the committee has bolstered its oversight on matters concerning China, raising tensions within U.S.-China trade relations. They have also reached out to the new SEC Chairman, Paul Atkins, advocating for an investigation into whether Chinese companies trading on U.S. exchanges are bypassing disclosure requirements.
China remains a significant player in U.S. trade, often flooding the market with affordable goods that have adversely affected domestic manufacturing and fueled the U.S. trade deficit.
Just recently, the White House and China announced a temporary pause in the trade war, agreeing to reduce tariffs on imports in the lead-up to further negotiations.
