US Government Accuses Tencent of Military Ties

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

Tencent, a 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 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. Tencent's inclusion, announced January 7th, immediately impacted its stock price.

Tencent's Response:

Tencent issued a statement to Bloomberg, emphatically denying its status as a military company or supplier. While the company claims the listing doesn't directly affect its operations, it intends to collaborate with the DOD to clarify the situation. This proactive approach mirrors that of other companies successfully removed from the list in previous years by engaging with the DOD.

Market Impact:

The DOD's announcement caused a significant 6% drop in Tencent's stock value on January 6th, with subsequent downward trends attributed to this listing. Given Tencent's global prominence—the world's largest video game company by investment and a major player overall—the implications of its inclusion, and potential exclusion from U.S. investment markets, are substantial.

Tencent's Gaming Empire:

Tencent's gaming division, Tencent Games, operates as a publisher and investor. Its portfolio includes significant stakes in prominent studios such as Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, FromSoftware, and even Discord, highlighting its extensive reach within the gaming industry. Its market capitalization dwarfs that of its closest competitor, Sony, by a factor of nearly four.