Is Tencent a Chinese Military Company? (Snap Aim Podcast Read Along)

In surprising but not really surprising news, the US Department of Defense (DoD) labeled Tencent as a Chinese military company. The DoD published a document on January 7th as a notice of Chinese military companies operating in the United States. 

In that giant list of companies listed in that document, Huawei Technologies, China Telecom Group, and Tencent Holdings LImited were identified as Chinese military companies in accordance with Section 1260H.

If you’re like me, you probably have no idea what this Section 1260H is and why this list exists. Well, there was a National Defense Authorization Act (NDAA) for Fiscal Year 2021  that was an established federal law that specified the budget, money spent, and policies of the DoD for that fiscal year.

So, Section 1260H of the National Defense Authorization Act for Fiscal Year 2021 requires the Secretary of Defense to annually identify each entity Secretary determines, based on the most recent information available, is operating directly or indirectly in the United States or any of its territories and possessions, that is a Chinese Military company. 

Being on this list doesn’t actually mean much right away for the companies legally. However, it definitely can affect their working partnerships and business if they want to work in the United States.

Fun fact: Trump vetoed this NDAA bill on December 23rd 2020 but the House and Senate voted December 28th and overrode his veto and was the only veto override of his presidency. He tried to veto this bill because it didn’t repeal Section 230 of the Telecommunications Act of 1996. Section 230 protects social media companies from being sued for what someone else said about a user on that platform and also allows social platforms to moderate their content by removing posts that violate their own standards as long as they’re acting in good faith.

The more you know. Now back to Section 1260H.

The DoD needs to update these lists annually until the end of 2030. Per the specifications of Section 1260H, a Chinese military company is defined by an entity that is engaged in providing commercial services, manufacturing, producing, or exporting and is either  “directly or indirectly owned, controlled, or beneficially owned by, or in an official or unofficial capacity acting as an agent of or on behalf of, the People’s Liberation Army or any other organization subordinate to the Central Military Commission of the Chinese Communist Party”; OR (2)  “identified as a military-civil fusion contributor to the Chinese defense industrial base.”

The NDAA’s term for military-civil fusion contributor includes the following:

(A) Entities knowingly receiving assistance from the Government of China or the Chinese Communist Party through science and technology efforts initiated under the Chinese military industrial planning apparatus.

(B) Entities affiliated with the Chinese Ministry of Industry and Information Technology, including research partnerships and projects.

(C) Entities receiving assistance, operational direction or policy guidance from the State Administration for Science, Technology and Industry for National Defense.

(D) Any entities or subsidiaries defined as a “defense enterprise” by the State Council of the People’s Republic of China.

(E) Entities residing in or affiliated with a military-civil fusion enterprise zone or receiving assistance from the Government of China through such enterprise zone.

(F) Entities awarded with receipt of military production licenses by the Government of China, such as a Weapons and Equipment Research and Production Unit Classified Qualification Permit, Weapons and Equipment Research and Production Certificate, Weapons and Equipment Quality Management System Certificate or Equipment Manufacturing Unit Qualification.

(G) Entities that advertise on national, provincial and non-governmental military equipment procurement platforms in the People’s Republic of China.

(H) Any other entities the Secretary determines is appropriate.[ii] (emphasis added)

I know that was a lot and if you’re curious about the NDAA and want to read up on it yourself, it’s all public online and it’s linked in the description of this video. 

The list that the DoD releases does change slightly year to year since companies can actually request reconsideration by providing a statement on the company’s detailed description with supporting evidence on why they should be removed from the 1260H list and how their company does not apply to the act’s circumstances.

Tencent provided a statement to CNN saying their company being on this 1260H list was a mistake. “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 was founded back in 1998 as Tencent Inc in the Cayman Islands. In 1999, Tencent created a social media platform called QQ. This was their main source of income and Tencent charged their users with premium monthly fees and hosted advertisements on their platform. Tencent Games was then founded in 2003 and published their first game QQ Tang on their social media platform. 

Tencent really got into the online gaming department in 2007 by outsourcing their development to South Korean studios to make Crossfire and Dungeon Fighter Online. Then, in 2011, Tencent acquired a majority interest of 92.78% in Riot Games. That cost them about $230 million.

Tencent followed the next year by grabbing a majority share  in Epic Games, then Riot Games sold the rest of their remaining equity to Tencent in 2015. In 2018, Tencent and The Lego Group actually decided to work together to develop online games. Also, did you know that Tencent purchased the rights to create System Shock 3 and other titles from OtherSide Entertainment back in 2020?

Most recently, Tencent owns 42% of Don’t Nod Entertainment (Life is Strange developers) in 2021, acquired Turtle Rock Studios in 2021, obtained the majority share for Bloober Team(Layers of Fear and Silent H*Ill 2 developers) in 2021, and acquired Grinding Gear Games (the creators of Path of Exile) in 2018.

In terms of gaming companies, Tencent also holds minority shares in FromSoftware, Remedy Entertainment, Krafton (PuBG Developers), Paradox Interactive, Ubisoft, and Kadokawa Corporation (the other company with a majority share of FromSoftware.

Also, I had no idea that Tencent helped fund the development of Discord. Tencent is really just everywhere and they even launched Tencent Pictures, a film and production company back in 2015.

So this is clearly showing how big Tencent is in games and other media platforms but why is it being labeled a Chinese military company? With a company as big as Tencent, it has to be noticed by their own government. 

Back in 2017, Tencent released a mobile game called Clap for Xi Jinping: An Awesome Speech for the 19th National Congress of the Chinese Communist Party. The gameplay? Players had 19 seconds to tap their screens to get as many claps as you could in that time for the party leader. 

Then, in 2019, Tencent actually collaborated with the propaganda department of the Guangdong Provincial Committee of the Chinese Communist Party and The People’s Daily, the official newspaper of the CCP, to make more patriotic games. 

Oh also, Tencent founded WeBank, one of China’s digital only banks and is creating digital currency. 

Obviously I know nothing about how our DoD operates and how Tencent could argue to be taken off this list of Chinese military companies but I feel I can comment on how sketchy Tencent feels based off its history. Tencent has just become this giant conglomerate in China and it doesn’t appear to be slowing down at all.