Tencent Branded a Chinese Military Company by US Government

Summary

• Tencent, a major Chinese tech firm, has been added to the Pentagon's list of companies with ties to the Chinese military (PLA).
• This listing triggered a decline in Tencent's stock price.
• Tencent denies being a military entity and plans to collaborate with the Department of Defense (DOD) to clarify the situation.

The Pentagon recently updated its list of Chinese companies with alleged links to the People's Liberation Army, including Tencent Holdings Limited. This action stems from a 2020 executive order by President Trump restricting US investment in Chinese military-affiliated companies. The DOD's list identifies firms believed to contribute to PLA modernization through technology, expertise, or research. While initially featuring 31 companies, the list has expanded since its inception, leading to the delisting of some companies from the New York Stock Exchange.

Tencent's inclusion on the updated list prompted a swift response. A Tencent spokesperson issued a statement to Bloomberg, asserting that the company is neither a military entity nor supplier and that the listing doesn't directly impact its operations. However, Tencent intends to engage with the DOD to resolve any misunderstandings.

This year, the DOD removed several companies from the list that no longer met the criteria for designation. Precedents exist where companies have successfully collaborated with the DOD to have their names removed, suggesting a similar strategy for Tencent.

The publication of the list negatively impacted the stock prices of several named companies. Tencent 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 player in the broader tech sector – its presence on this list and potential removal from US investment options carry significant financial ramifications.

Tencent's gaming operations are managed through Tencent Games, its publishing arm. However, Tencent Holdings also holds significant stakes in numerous prominent 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 developers and related companies, such as Discord.