US Government Labels Tencent as Chinese Military Firm

Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Military Ties

Tencent, a Chinese tech giant, has been added to the Pentagon's list of companies with links to the Chinese military, specifically the People's Liberation Army (PLA). This designation stems from a 2020 executive order by former President Trump, prohibiting US investment in Chinese military entities and their affiliates. The order also mandates divestment from already invested companies.

The Department of Defense (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 three companies from the New York Stock Exchange.

Tencent's inclusion in the DOD's latest update (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 due to no longer meeting the criteria. Bloomberg notes that some companies have successfully collaborated with the DOD to achieve removal, suggesting a similar strategy for Tencent.

The publication of the list correlated with a decline in stock value for several named companies. Tencent shares experienced a 6% drop on January 6th, with subsequent downward trends attributed to its inclusion. Given Tencent's global prominence—the world's largest video game company by investment and a major global player—its presence on the list and potential removal from US investment options carry significant financial implications.

Tencent's gaming arm, Tencent Games, operates as a publishing division, but the parent company, Tencent Holdings Limited, also holds stakes in numerous successful game studios, including Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. Tencent Games has further invested in various other prominent developers and related companies such as Discord. Its market capitalization dwarfs that of its closest competitor, Sony, by a factor of nearly four.