Tencent Branded a Chinese Military Company by US Government

Summary

• The Pentagon has added Tencent to its list of companies with ties to the Chinese military.
• This designation led to a decline in Tencent's stock price.
• Tencent denies being a military entity and plans to collaborate with the Department of Defense (DOD) to clarify the situation.

The Pentagon's recent update to its list of companies linked to China's People's Liberation Army (PLA) includes Chinese tech giant Tencent. This action stems from a 2020 executive order by President Trump restricting US investment in Chinese military companies and their affiliates. The DOD list identifies companies believed to contribute to PLA modernization through technology, expertise, or research. While the initial list contained 31 companies, it has since expanded. This executive order previously resulted in three companies being delisted from the New York Stock Exchange.

Tencent's inclusion on the January 7th DOD update prompted an immediate response. A Tencent spokesperson issued a statement to Bloomberg, asserting:

Tencent's Response to DOD Listing

We are not a military company or supplier. This listing, unlike sanctions or controls, has no impact on our operations. We will, however, cooperate with the Department of Defense to resolve any misunderstandings.

The DOD list is not static; companies previously designated as military-linked but no longer meeting the criteria have been removed. Bloomberg notes that at least two companies successfully had their names removed through collaboration with the DOD, suggesting a similar strategy for Tencent.

The publication of the list negatively impacted the stock prices of many listed companies. Tencent's shares experienced a 6% drop on January 6th, with subsequent downward trends attributed to this DOD designation by market analysts. Given Tencent's global prominence—the world's largest video game company by investment and a major player overall—its inclusion and potential US investment restrictions could have significant financial consequences.

Tencent's gaming division, Tencent Games, is a powerhouse in the industry, boasting a market capitalization nearly four times that of Sony. Beyond its publishing arm, Tencent holds stakes in numerous successful studios, including Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Its investments also extend to other notable developers and companies like Discord.