Summary
- Tencent's inclusion on a Pentagon list of companies with ties to the Chinese military caused a stock price decline.
- The listing stems from a 2020 executive order restricting US investment in Chinese military entities.
- Tencent denies being a military company and plans to collaborate with the Department of Defense (DOD) to clarify the situation.
Tencent Holdings Limited, a Chinese technology giant, has been added to the US Department of Defense's (DOD) list of companies linked to China's People's Liberation Army (PLA). This designation is a consequence of a 2020 executive order by former President Trump, prohibiting US investors from engaging with Chinese military companies and their affiliates. The order also mandates divestment from such entities.
The DOD list identifies companies believed to contribute to the PLA's modernization through technology, expertise, and 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, announced on January 7th, prompted an immediate response. A Tencent spokesperson issued a statement to Bloomberg, asserting:
Tencent's Response to DOD Listing
"We are not a military company or supplier. This listing, unlike sanctions, has no direct impact on our operations. However, we will actively engage with the Department of Defense to resolve any misunderstandings."
The DOD list is not static; companies previously designated as military-linked but no longer meeting the criteria have been removed. Bloomberg notes that some companies have successfully collaborated with the DOD to achieve delisting, suggesting a similar strategy for Tencent.
The publication of the list triggered a market reaction. Tencent's stock experienced a 6% drop on January 6th, with subsequent downward trends attributed by analysts to its inclusion on the DOD list. Given Tencent's global prominence – the world's largest video game company by investment and a major player overall – its listing and potential removal from US investment portfolios carries significant financial implications.
Tencent's gaming operations are primarily managed through Tencent Games, its publishing arm. However, its influence extends far beyond, encompassing 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 numerous other prominent developers and related companies such as Discord.
