Tencent: US Declares Chinese Firm Military

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

Tencent, a prominent Chinese tech giant, 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 new investments.

The DOD list, encompassing firms believed to contribute to PLA modernization through technology, expertise, or research, has expanded since its initial publication with 31 companies. Tencent's appearance on the latest iteration, released January 7th, immediately impacted its stock price.

Tencent's swift response, relayed through a spokesperson to Bloomberg, firmly denies any military affiliation or supply role. The company asserts the listing's lack of direct business impact but expresses its intention to collaborate with the DOD to clarify any misunderstandings.

This isn't the first time companies have been removed from the list. Several firms previously designated as military-linked have since been delisted after demonstrating they no longer meet the criteria. At least two companies successfully achieved removal through collaboration with the DOD, suggesting a similar path for Tencent.

The listing's announcement triggered a 6% drop in Tencent's stock value on January 6th, with subsequent downward trends observed. Analysts link this decline directly to its inclusion on the DOD's list. Given Tencent's global prominence – the world's largest video game company by investment and a major player overall – this designation and potential U.S. investment restrictions carry significant financial implications.

Tencent's gaming empire, Tencent Games, operates as a publishing division, but the parent company, Tencent Holdings Limited, also holds substantial stakes in numerous successful game studios. This portfolio includes Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, FromSoftware, and investments in many other developers and related companies like Discord. The financial ramifications of its inclusion on the DOD list are substantial, considering its market capitalization dwarfs that of its nearest competitor, Sony, by a factor of almost four.