Tencent Flagged as Military-Linked by US

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

Tencent, a major Chinese technology conglomerate, has been added to the US 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 President Trump restricting US investment in Chinese military entities. The order mandates divestment from listed companies and prohibits new investments.

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 previous delistings from the New York Stock Exchange.

Tencent's appearance on the latest iteration of the list, released January 7th, prompted an immediate 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 have been removed from the list after no longer meeting the criteria. Precedents exist where companies have successfully collaborated with the DOD to achieve removal, suggesting a similar strategy for Tencent.

The publication of the list correlated with a noticeable decline in Tencent's stock value. A 6% drop occurred on January 6th, with subsequent downward trends attributed to the DOD listing. Given Tencent's global prominence – the world's largest video game company by investment and a leading global corporation – its inclusion carries significant financial implications for US investors.

Tencent's vast gaming portfolio, managed through Tencent Games, includes substantial ownership stakes in prominent studios such as Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Furthermore, Tencent Games boasts investments in numerous other game developers and related companies, including Discord. Its market capitalization dwarfs that of its closest competitor, Sony, by a factor of nearly four.