Summary
- Tencent, a Chinese tech giant, has been added to a Pentagon list of companies with ties to the Chinese military (PLA).
- This listing triggered a decline in Tencent's stock price.
- Tencent denies being a military entity and plans to collaborate with the Department of Defense (DOD) to clarify the situation.
Tencent Holdings Limited, a major Chinese technology company, has been included in the US Department of Defense's (DOD) list of companies linked to the People's Liberation Army (PLA). This action stems from 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 three companies from the New York Stock Exchange.
Tencent's inclusion in the latest DOD update, released January 7th, prompted a swift 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 operational impact. We will, however, work with the Department of Defense to resolve any misunderstandings."
The DOD list has seen some companies removed in recent years after ceasing to meet the criteria for military designation. Bloomberg notes that at least two companies successfully had their names removed after working with the DOD, suggesting a similar approach by Tencent.
The publication of the list negatively impacted the stock prices of several listed companies. Tencent's shares experienced a 6% drop on January 6th, with subsequent downward trends, indicating a clear correlation with the DOD listing. Given Tencent's global prominence – the world's largest video game company by investment and a leading global corporation – its inclusion on the list and potential removal as a US investment option carries significant financial implications.
Tencent's gaming arm, Tencent Games, operates as a major publisher, but its influence extends far beyond. Tencent holds ownership stakes in numerous successful game studios, including Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. Furthermore, Tencent Games has invested in numerous other prominent developers and related companies such as Discord.
