This move would inflame tensions with Beijing days before the US President-elect (Joe Biden) takes office.
Defense Ministry officials overseeing the selection have not finalized plans to add the companies and are also discussing adding other Chinese companies.
In the event of an addition, Alibaba and Tencent are subject to an executive order signed by US President Trump in November, which prohibits American investors from buying shares of blacklisted companies from November 2021.
Trump unleashed a raft of tough measures against Chinese companies in his final days at the White House as he seeks to cement his militant legacy, and as Beijing and Washington clash over the Corona virus and the Chinese crackdown on Hong Kong.
US President Trump signed an executive order banning transactions with eight Chinese software applications, including the Alipay mobile payment app of the Alibaba Group, QQ Wallet and Tencent’s WeChat Pay.
And some investors have expressed doubts that Tencent and Alibaba are subject to the long-term US restrictions, because they are Large-scale private companies owned by US and global investors.
The November executive order sought to give strength to a 1999 law that mandated the Defense Ministry to draft a list of Chinese companies believed to be owned or controlled by the Chinese military.
The Pentagon, which complied with the mandate last year, has blacklisted 35 companies, including China’s major chip maker SMIC and oil giant CNOOC.
Confusion over the scope of the November executive order has caused dramatic volatility on the New York Stock Exchange in recent days.
The New York Stock Exchange announced plans to write off the companies of China Mobile, China Telecom and China Unicom. S&P and Dow Jones followed the New York Stock Exchange and said it would remove US depositary receipts for these three telecom companies.