Chinese publisher Tencent is the largest video game company in the world. Their wholly owned subsidiaries include League Of Legends developer Riot Games, Path Of Exile developer Grinding Gear Games, and UK-based Sumo Group. They have shares in everything from Epic Games to Ubisoft to Bloober Team, which is rebooting Silent Hill 2. Are you a game developer? Chances are at least one percent of your body belongs to Tencent. Maybe one of your fingers.
And now it turns out that Tencent is also some kind of military operator. Or at least that’s what the US Department of Defense would like us to believe: they just accidentally added the company to the infamous list of Chinese military companies, along with lithium-ion battery maker CATL. This potentially makes it harder for Tencent to do business in the US, but Tencent says it’s all based on a “misunderstanding.”
As reported Bloombergthe U.S. Department of Defense’s list of Chinese military companies dates back to an executive order issued by recently re-elected President Donald Trump in 2020 that sought to prevent U.S. companies from investing in entities affiliated with the Chinese military.
Formally known as Section 1260Hthe list is updated annually and currently includes 134 companies, including phone manufacturer Huawei. Being there doesn’t mean the companies in question will immediately be banned from doing business with the U.S., but it does put pressure on the U.S. Treasury to punish them. This could scare off investors: BBC reports that Tencent has already seen its share price decline in Hong Kong as early as today, Tuesday, January 7.
Tencent, of course, claims that the whole thing is a mistake and that the nomination will not have a material impact on their business. “We are not a military company or supplier,” Tencent spokesman Danny Marti told the BBC. “Unlike sanctions and export controls, this announcement has no impact on our business. Nevertheless, we will work with the Department of Defense to resolve any disagreements.”
I’m no expert on superpower geopolitics, but I understand that this is all part of the U.S. effort to contain China both economically and in terms of its military applications and connections to Chinese technology companies and research organizations. Here US Department of Defense Press Release 2022 which expresses a way of thinking. fragment:
“The Department is committed to highlighting and opposing the PLA’s military-civilian fusion strategy, which supports the modernization goals of the People’s Liberation Army (PLA) by providing it with access to advanced technologies and expertise acquired and developed by Chinese companies, universities, and research programs that spend to be civil entities. Section 1260H directs the Department to begin identifying, among other things, entities contributing to military-civilian fusion operating directly or indirectly in the United States.
Given the sheer scale of Tencent’s operations – it also deals in generative artificial intelligence and cloud computing, and owns WeChat, one of the largest social media networks – it seems likely that they have military connections somewhere. But then again, so do many huge US tech companies like Activision-Blizzard and Microsoft. Many of them connect the technology industry with the world’s armed forces.
All this in connection with the news that Tencent is considering buying out Ubisoft with the aid of the founding Guillemot family. It also follows the resignation of two Tencent-appointed Epic Games executives in response to a U.S. Department of Justice investigation into potential antitrust violations.
