While the Chinese web big Tencent is finest identified for its tremendous app WeChat, it’s additionally a serious investor in U.S. tech firms and startups. Some of its most notable and nonetheless energetic investments embody Reddit, Snap, and Fortnite creator Epic Games.
Things would possibly get a bit awkward, although, as a result of Tencent was designated a “Chinese army firm” by the U.S. Department of Defense on Monday. The itemizing serves as a warning from the U.S. about firms it claims are concerned in Chinese “military-civil fusion” efforts, in accordance with a 2022 DoD press launch. The itemizing has no authorized penalties past barring U.S. authorities contractors from doing enterprise with Tencent beginning in 2026, in accordance with U.S. regulation.
The discover doesn’t specify why the U.S. believes Tencent helps the Chinese army. Tencent is strongly refuting the itemizing, telling TechCrunch it’s “clearly a mistake” and “we aren’t a army firm or provider.” The Defense Department didn’t reply to a request for remark.
Tencent is energetic within the VC world via an arm it calls the Tencent Exploration Team that it runs out of Palo Alto and whose investments embody Snap, Epic Games, and others like insurer Oscar Health. Tencent can also be a serious shareholder in Reddit, though its stake just lately dipped beneath the ten% threshold, an SEC submitting from November 2024 reveals. (Reddit wouldn’t remark as of press time on precisely how a lot Tencent owns.)
Investing in international tech firms, notably in sectors like well being and video video games, has lengthy been a spotlight of Tencent. If Tencent isn’t capable of get itself off the checklist — like smartphone maker Xiaomi efficiently did in 2021 — it may hurt its investing actions within the U.S., with founders cautious of accepting funds from an organization formally designated as linked to the Chinese army, even with out public proof.
There’s additionally a danger that this measure leads to strain for additional sanctions in opposition to Tencent from different components of the U.S. authorities just like the Treasury Department, Reuters reported.
Even with none additional actions, the itemizing cements a long-running pattern of U.S.-China decoupling. It was as soon as comparatively frequent for Chinese VCs to put money into U.S. firms (and vice versa), however these days aren’t coming again anytime quickly.
