Tencent Branded a Chinese Military Company by US Government

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

Tencent, a prominent 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 inclusion stems from a 2020 executive order by former President Trump restricting U.S. investment in Chinese military entities. The order mandates divestment from listed companies and prohibits further 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 several companies from the New York Stock Exchange.

Tencent's inclusion, announced on January 7th, prompted a swift denial from the company. A spokesperson issued a statement to Bloomberg asserting that Tencent is "not a military company or supplier" and that the listing doesn't directly impact its operations. However, the company pledged to collaborate with the DOD to clarify any misunderstandings.

This development follows a trend of companies being removed from the list after demonstrating they no longer meet the criteria for designation. At least two companies have successfully petitioned for removal in recent years, suggesting Tencent may pursue a similar course of action.

The DOD's announcement correlated with a noticeable decline in Tencent's stock value. A 6% drop on January 6th, and subsequent downward trends, highlight the market's sensitivity to the listing. Given Tencent's global prominence – it's the world's largest video game company by investment and a major player in the broader tech sector – its inclusion carries significant financial implications.

Tencent's gaming arm, Tencent Games, operates as a major publisher and investor. Its portfolio includes stakes in numerous successful studios, such as 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, including Discord. This extensive network underscores the potential ripple effects of its current DOD listing.