US Labels Tencent a Chinese Military Firm

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. The order mandates divestment from listed companies and prohibits new investments.

The DOD list, which identifies companies believed to contribute to PLA modernization through technology, expertise, or research, has grown since its initial publication with 31 companies. Tencent's inclusion, announced on January 7th, immediately impacted its stock price.

Tencent's Response

In a statement to Bloomberg, Tencent denied being a military company or supplier, asserting that the listing doesn't directly affect its operations. However, the company indicated its willingness to collaborate with the DOD to clarify any misunderstandings. This proactive approach mirrors previous instances where companies successfully petitioned for removal from the list after demonstrating they no longer met the criteria.

Market Impact

The DOD's announcement caused a significant drop in Tencent's stock value, with a 6% decline on January 6th and subsequent downward trends. Analysts directly link this downturn to the DOD listing. Given Tencent's global prominence – it's the world's largest video game company by investment and a global industry giant – this inclusion and potential removal from U.S. investment portfolios carries substantial financial implications.

Tencent's Global Reach

Tencent's gaming division, Tencent Games, operates as a major publisher and investor. Its portfolio includes significant stakes in numerous successful game studios such as Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. Furthermore, Tencent Games has invested in numerous other developers and related businesses, including Discord. Its market capitalization dwarfs that of its closest competitor, Sony, by a factor of almost four.