US Accuses Tencent of Military Ties

Pentagon List Includes Tencent, Impacting Stock Value

Tencent, a major Chinese technology company, has been added to the U.S. Department of Defense's (DOD) list of companies with ties to the Chinese military. This listing, stemming from a 2020 executive order, prohibits U.S. investment in Chinese military entities and their subsidiaries. The order mandates divestment from any listed companies.

The DOD list, which identifies companies believed to contribute to the People's Liberation Army's (PLA) modernization through technology, expertise, or research, has grown since its initial publication with 31 companies. The inclusion of Tencent on the latest update, released January 7th, caused a significant drop in Tencent's stock price.

Tencent's Response

Tencent swiftly denied being a military company or supplier, stating that the listing doesn't directly affect its operations. However, the company indicated its intention to collaborate with the DOD to clarify any misunderstandings and potentially seek removal from the list. This follows the precedent of other companies successfully removed after working with the DOD.

Financial Implications

The inclusion on the DOD list has had a noticeable impact on Tencent's stock value, with a 6% drop observed on January 6th, and subsequent downward trends. Experts link this decline to the listing's implications for U.S. investment. Given Tencent's global prominence—the world's largest video game company by investment and a major player in the broader tech sector—the consequences of restricted U.S. investment could be substantial.

Tencent's Gaming Empire

Tencent's vast gaming portfolio, managed through Tencent Games, includes significant ownership stakes in prominent studios such as Epic Games, Riot Games, Techland, Don't Nod, Remedy Entertainment, and FromSoftware. The company has also invested in numerous other game developers and related businesses, including Discord. Tencent's market capitalization significantly surpasses its closest competitor, Sony, highlighting its considerable influence in the gaming industry.