The United States Department of Defense (DoD) has officially added Chinese tech giant Tencent to its list of companies with alleged ties to the Chinese military. This move is part of the ongoing efforts by the U.S. government to counter China’s military-civil fusion strategy, aimed at integrating civilian technologies into military advancements.
Impact of the Designation
While this addition does not come with immediate sanctions, it has significant implications for Tencent’s business prospects in the U.S. Shares in Tencent have already dipped by 7%, marking the company’s most substantial drop since October 2024. The listing could discourage American companies from engaging with Tencent, potentially affecting its investments and partnerships in the gaming and technology sectors.
Tencent’s Response
A Tencent spokesperson, Danny Marti, stated that the designation is a misunderstanding. In a statement to The Verge, Marti said, “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding.”
Tencent remains hopeful that it can achieve a resolution similar to the case of Xiaomi, another Chinese tech company previously blacklisted by the U.S. government. Xiaomi successfully contested the designation and was removed from the list in 2021.
Implications for the Gaming Industry
Tencent is the world’s largest gaming company, owning or holding shares in numerous game studios, including Riot Games (League of Legends), Techland (Dying Light), Epic Games, FromSoftware, and Activision Blizzard. The company’s significant presence in the gaming industry makes this development particularly noteworthy.
Additionally, Tencent distributes the Tencent Nintendo Switch in China. However, the company recently announced that it will end online services for the device in the region by 2026.
U.S.-China Tech Rivalry
The designation of Tencent as a military-affiliated company is part of a broader tech rivalry between the U.S. and China. Recent U.S. export controls aim to slow China’s development of advanced AI tools and semiconductors, which could be used for military purposes.
China’s military-civil fusion strategy seeks to break down barriers between the country’s civilian research sectors and its military. Under President Xi Jinping’s leadership, this strategy has been elevated to a national priority.
Future Outlook
Although the listing does not impose immediate penalties, it casts a shadow on Tencent’s reputation and may hinder future business opportunities in the U.S. Despite this, history shows that companies can successfully challenge such designations. Tencent’s ongoing discussions with the DoD suggest that the company will pursue similar avenues to address the issue.
