Tencent Branded a Chinese Military Company by US Government

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

Tencent, a Chinese technology 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 Chinese military entities. The order mandates divestment from such companies and prohibits new investments.

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 several companies from the New York Stock Exchange.

Tencent's inclusion, announced on January 7th, prompted an immediate response. A Tencent spokesperson issued a statement to Bloomberg, asserting that Tencent is "not a military company or supplier" and that the listing has no operational impact. However, the company pledged to collaborate with the DOD to clarify any misunderstandings.

This year, the DOD removed several companies from the list that no longer met the criteria. Precedents exist of companies successfully removing themselves from the list through cooperation with the DOD, suggesting a similar strategy for Tencent.

The list's release negatively impacted the stock prices of listed companies. Tencent experienced a 6% share drop on January 6th, with subsequent downward trends attributed to its inclusion. Given Tencent's global prominence – it's the world's largest video game company by investment and a major global player – its presence on the list and potential removal from U.S. investment portfolios carries significant financial implications.

Tencent's vast gaming empire, Tencent Games, dwarfs its competitors, boasting a market capitalization nearly four times that of Sony. Beyond its publishing arm, Tencent holds stakes in numerous successful game studios, including Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. It has also invested in numerous other developers and related companies such as Discord.