US Designates Tencent as Chinese Military Firm

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 designation stems from a 2020 executive order prohibiting U.S. investment in Chinese military entities. The inclusion on the list immediately resulted in a decline in Tencent's stock price.

The DOD's list, initially comprising 31 companies, now includes Tencent, among others. These companies are believed to contribute to the People's Liberation Army's modernization efforts through technology, expertise, and research. The executive order has previously led to the delisting of companies from the New York Stock Exchange.

Tencent issued a statement to Bloomberg, asserting that it is "not a military company or supplier" and that the listing doesn't directly impact its operations. However, the company intends to collaborate with the DOD to clarify any misunderstandings and potentially have its name removed from the list. This follows precedents where companies have successfully worked with the DOD to achieve delisting.

The listing's impact on Tencent's stock is notable. A 6% drop was observed on January 6th, with a continued downward trend attributed to the DOD designation. Given Tencent's significant global presence, particularly as the world's largest video game company by investment, this inclusion carries substantial financial implications.

Tencent's gaming division, Tencent Games, operates globally and holds stakes in numerous prominent game studios, including Epic Games, Riot Games, Techland, Dontnod Entertainment, Remedy Entertainment, and FromSoftware. The company has also invested in other significant industry players like Discord. The potential loss of U.S. investment presents a significant challenge to the company's future growth.