Tencent Branded a Chinese Military Company by US Government

Pentagon List Includes Tencent, Causing Stock Dip; Company Responds

Tencent, a major Chinese technology conglomerate, 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 designation stems from a 2020 executive order by former President Trump restricting U.S. investment in Chinese military entities and their subsidiaries. The order mandates divestment from any listed companies.

The DOD's list identifies companies believed to contribute to the PLA's modernization through technology, expertise, and 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 in the latest DOD update, released January 7th, prompted a swift 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. Bloomberg notes that some companies have successfully collaborated with the DOD to have their names removed, suggesting a similar strategy for Tencent.

The DOD's announcement correlated with a significant drop in Tencent's stock value. Shares fell 6% on January 6th and have continued a slight downward trend, a consequence attributed by experts to the DOD listing. Given Tencent's global prominence—the world's largest video game company by investment and a leading global corporation—its inclusion on the list and potential removal as a U.S. investment option carries substantial financial implications.

Tencent's gaming division, Tencent Games, is a powerhouse in the industry, boasting a market capitalization nearly four times that of Sony. Tencent Holdings Limited also holds significant stakes in numerous successful game studios, including Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. Furthermore, Tencent Games has invested in numerous other prominent developers and related companies such as Discord.