The US Department of Defense dropped a bombshell this week by adding Tencent, one of the world’s largest gaming companies, to its Chinese military companies list. Shockwaves were sent through the gaming industry, while the tech giant immediately pushed back, dismissing the designation as a “misunderstanding” and announcing plans to challenge the decision.
The DoD’s list names companies believed to have ties or provide support to China’s People’s Liberation Army. Though inclusion on the list does not bring direct sanctions, it has already unnerved investors, with Tencent’s stock falling 7% on the Hong Kong exchange after the announcement.
US Blacklists Tencent, Company Protests
In response to the designation, Tencent didn’t pull any punches, issuing a forceful statement declaring that it is “neither a Chinese military company nor a military-civil fusion contributor to the Chinese defense industrial base.” The company insists this is a case of mistaken identity that needs to be corrected through official channels.
The DoD’s list names entities that it believes are connected to or support the China People’s Liberation Army.Â
Although this blacklisting in itself brings no direct punitive measure, the effects have been quite real, however, and soon after its publication, Tencent saw its stock shed 7% on the Hong Kong exchange.
Tencent has also come out with a full statement to refute the designation, saying it is “neither a Chinese military company nor a military-civil fusion contributor to the Chinese defense industrial base.”Â
The company has argued that this inclusion on the list is an error that needs to be rectified through official channels. It should be noted that this listing is a result of an executive order issued during the Trump administration, although the current implementation differs from the original order blocking US investment in certain Chinese companies.Â
The current listing specifically pertains to US defense procurement and does not prevent other entities from conducting business with Tencent.
In its statement, Tencent carefully distinguished this designation from other more severe US government restrictions, noting that “Unlike other lists maintained by the US Government for sanctions or export control measures, inclusion in the CMC List relates only to US defense procurement.”Â
Gaming Giant Faces US Restrictions
The company also highlighted that the listing is separate from the Non-SDN Chinese Military-Industrial Complex List maintained by the US Office of Foreign Assets Control, which means that general business dealings and securities transactions remain unrestricted for non-DoD entities.
Tencent’s global gaming presence makes this designation particularly noteworthy. As the world’s largest video game publisher, the company maintains an extensive portfolio of gaming investments and ownership.Â
It fully owns major studios like Riot Games (League of Legends), Funcom, and Grinding Gear Games (Path of Exile), while holding significant stakes in industry leaders such as Epic Games, Larian Studios (Baldur’s Gate 3), FromSoftware (Elden Ring), Paradox Interactive, Frontier Developments, Roblox Corporation, and Ubisoft.
The company has said it will take a two-step approach to handle the situation: It will first try to hold direct talks with the US Department of Defense to clear up what it called a “misunderstanding.” If those talks fail, Tencent has said it will take legal action to get off the list.
There is precedent for successful removal from this list. In 2021, Xiaomi Corporation, a major Chinese electronics manufacturer known primarily for smartphones, successfully negotiated its removal, which could provide a roadmap that Tencent may follow.
Gaming Industry on Edge as Tencent Battles US Listing
While the listing may not have an immediate practical impact, the reputational and market reaction to such designation by the government shows the importance of this listing.Â
The situation very much typifies US-China business relations today, particularly for companies operating globally in the technology and gaming sectors amidst increasingly complex international regulatory frameworks.
As this situation develops, the gaming industry will be watching closely, given Tencent’s extensive involvement in many major gaming studios and projects around the world. The outcome of the appeal by Tencent may have wider implications for international business relations and the complex global ecosystem of the gaming industry.
