Tencent Branded a Chinese Military Company by US Government

Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Designation

Tencent, a Chinese tech giant, has been added to the U.S. Department of Defense's (DOD) list of companies with ties to the Chinese military, specifically the People's Liberation Army (PLA). This inclusion stems from a 2020 executive order by former President Trump restricting U.S. investment in such entities. The order mandates divestment from listed companies and prohibits new investment.

The DOD list identifies companies believed to contribute to PLA modernization through technology, expertise, or research. While initially comprising 31 companies, the list has expanded since its inception, leading to the delisting of some companies from the New York Stock Exchange.

Tencent's inclusion, announced January 7th, prompted an immediate response. A Tencent spokesperson issued a statement to Bloomberg, asserting: "We are not a military company or supplier. Unlike sanctions or controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding."

This year, several companies previously listed have been removed after no longer meeting the criteria. Precedents exist where companies have successfully collaborated with the DOD to achieve removal. Tencent is expected to pursue a similar course of action.

The DOD's announcement triggered a decline in Tencent's stock value. A 6% drop occurred on January 6th, with subsequent downward trends attributed to the listing. Given Tencent's global prominence—the world's largest video game company by investment and a major player overall—this designation and potential U.S. investment restrictions carry significant financial implications.

Tencent's gaming sector operates under Tencent Games, its publishing division. However, Tencent Holdings Limited's influence extends far beyond, encompassing ownership stakes in numerous renowned studios, including Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Additionally, Tencent Games boasts investments in dozens of other prominent developers and related companies such as Discord.