US Blacklists Chinese Military Giant Tencent

Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Military Ties

Tencent, a prominent 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 and their subsidiaries. The order mandates divestment from any listed companies.

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 the delisting of several companies from the New York Stock Exchange.

Tencent's inclusion in the latest DOD update, 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 previously listed have been removed after no longer meeting the designation criteria. Precedents exist of companies successfully lobbying the DOD for removal, suggesting Tencent may pursue a similar strategy.

The DOD's announcement correlated with a significant drop in Tencent's stock value. Shares declined by 6% on January 6th and have continued a slight downward trend, highlighting the market's sensitivity to this designation. Given Tencent's global standing – the world's largest video game company by investment and a major player overall – its inclusion on the list carries substantial financial implications for the company and the U.S. investment landscape.

Tencent's gaming division, Tencent Games, is a powerhouse, boasting a market capitalization dwarfing its closest competitor, Sony, by a factor of four. The company's portfolio includes significant ownership stakes in renowned studios such as Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Tencent Games has also invested in numerous other prominent developers and related businesses, including Discord.