Tencent Branded a Chinese Military Company by US Government

Pentagon List Includes Tencent, Causing Stock Dip; Company Responds

Tencent, a leading 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 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 several delistings from the New York Stock Exchange. Tencent's inclusion in the latest update, released January 7th, caused a significant 6% drop in its stock value on January 6th, with subsequent downward trends attributed to this development.

Tencent, in a statement to Bloomberg, refuted the designation, asserting it is neither a military company nor supplier. The company emphasized that while the listing doesn't directly impact its operations, it plans to collaborate with the DOD to clarify any misunderstandings. This proactive approach mirrors that of other companies successfully removed from the list in previous years by engaging with the DOD.

The financial implications of Tencent's inclusion are substantial. As the world's largest video game company by investment and a global giant, its potential exclusion from U.S. investment markets could have far-reaching consequences. Tencent's gaming division, Tencent Games, operates globally and holds significant stakes in numerous prominent game studios, including Epic Games, Riot Games, Techland, Dontnod Entertainment, Remedy Entertainment, and FromSoftware, as well as investments in companies like Discord. Its market capitalization dwarfs that of its closest competitor, Sony, by a factor of four.