Summary
- The Pentagon's list of companies with ties to the Chinese military now includes Tencent.
- This designation led to a decline in Tencent's stock price.
- Tencent denies being a military entity and plans to collaborate with the Department of Defense to clarify the situation.
Tencent, a leading Chinese technology firm, has been added to the Pentagon's list of companies linked to China's military, the People's Liberation Army. This action stems from a 2020 executive order by President Trump, barring US investors from acquiring stakes in Chinese military companies and their affiliates, and mandating divestment from existing holdings.
The Department of Defense maintains this list, identifying companies believed to contribute to the PLA's modernization through technology, expertise, or research. While initially comprising 31 entities, the list has since expanded. The executive order's immediate impact included the delisting of three companies from the New York Stock Exchange.
The DOD's latest update, released January 7th, included Tencent Holdings Limited. Tencent swiftly responded via a spokesperson, issuing a statement to Bloomberg:
Tencent's Response to DOD Listing
We are not a military company or supplier. This listing, unlike sanctions, doesn't affect our operations. We will, however, cooperate with the Department of Defense to resolve any misunderstandings.
The list has seen some companies removed this year for no longer meeting the criteria. Bloomberg notes that at least two companies previously removed their names through collaboration with the DOD, suggesting a similar strategy for Tencent.
The publication of the list triggered a stock market downturn for several named companies. Tencent's shares dropped 6% on January 6th and have continued a slight downward trend, a correlation acknowledged by market analysts. Given Tencent's global prominence—the world's largest video game company by investment and a major global player—its inclusion on the list and potential removal from US investment options could have significant financial repercussions.
A gaming industry giant, boasting a market capitalization nearly four times that of its nearest competitor, Sony, Tencent Holdings Limited operates its gaming division, Tencent Games. Beyond this, Tencent holds ownership stakes in numerous successful studios, including Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Tencent Games has also invested in many other prominent developers and related businesses such as Discord.
