From London: As Australians woke this morning, a significant new front was opening in Washington's technology war with Beijing. The Trump administration is actively debating whether to force Chinese conglomerate Tencent to exit its investments in some of the world's best-known gaming companies, the Financial Times reported on Tuesday, citing people familiar with internal White House deliberations.
The companies at the centre of the review are household names to anyone under forty. Tencent owns a 28 percent stake in Epic Games, the North Carolina-based creator of hit title Fortnite, and owns Riot Games, the Los Angeles-based developer of League of Legends. Beyond those two, in 2016, Tencent bought a majority stake in Supercell, the Finnish mobile-game maker behind Clash of Clans, for about $8.6 billion. The White House is reportedly weighing whether to compel divestment of all three holdings because of the volume of American user data each platform collects.
The White House is debating whether to allow Tencent to keep its stakes in major video game groups as President Donald Trump prepares to meet Chinese President Xi Jinping in China in April. That timing is significant. Pressuring Tencent could serve as a bargaining chip in broader trade negotiations, or it could be shelved entirely if Xi offers concessions elsewhere. A cabinet-level meeting scheduled for Tuesday to review the issue was postponed due to scheduling conflicts, the Financial Times said.
This is not the first time Tencent has attracted Washington's scrutiny. Tencent's gaming holdings are among the longest-running cases reviewed by the Committee on Foreign Investment in the United States, the Treasury-led panel responsible for examining foreign investments that could affect national security. The core concern is straightforward: gaming platforms accumulate enormous amounts of personal data, and regulators want assurances that information about millions of American players cannot flow to Beijing.
On 2 January 2025, the US Department of Defense added Tencent to its list of "Chinese military companies", a designation that publicly flagged the conglomerate as a potential participant in China's military-civil fusion strategy. Shortly after the listing, Tencent's stock value dropped by 10 percent, prompting the company to repurchase the most shares in almost two decades to offset the decline. In response, Tencent called its inclusion "a mistake", stating: "We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business."
The security case against Tencent deserves serious consideration on its merits. Governments that take data sovereignty seriously, including Australia, have reason to be concerned about the reach of Chinese-owned platforms. An Australian Senate committee has recommended WeChat be banned from use on government-owned devices, citing its potential to gather intelligence about users. The argument that gaming companies pose a similar risk, given the volume of location, behavioural and payment data they collect, is not implausible.
That said, the counterarguments are substantial. Tencent has consistently maintained that its gaming subsidiaries operate independently of its Chinese parent and do not share user data with Beijing. One source familiar with the CFIUS review said Epic Games had not been sharing any user data with Tencent. Forced divestment of this scale would be legally complex and commercially disruptive, potentially triggering protracted court battles similar to those seen when the Pentagon previously designated Chinese smartphone maker Xiaomi, a designation later overturned in court.
The administration's track record on Chinese tech divestment also warrants caution before reading too much into the current deliberations. When Congressional legislation required the shutdown of TikTok in the United States, the administration initially dragged its feet, ultimately brokering a deal for ByteDance to sell a controlling stake to a consortium of American-backed investors. The parallel raises a legitimate question: is this genuine national security policy, or leverage designed to extract concessions from Beijing ahead of April's summit?
For Canberra, the implications are worth watching closely. Australia's own regulatory posture on Chinese technology investment has grown more cautious in recent years, and any forced restructuring of Tencent's global gaming portfolio would send a signal to allies about the pace and seriousness of Washington's technology decoupling from China. Australian firms with Chinese investment exposure, and there are more than most Australians realise, would also take note.
The honest answer is that nobody outside the White House knows how serious this is. Tencent's gaming investments are among the longest-running cases under CFIUS review, a process that has ground on for years without a definitive resolution. The administration may yet opt for a negotiated risk-mitigation arrangement rather than outright divestment, a path CFIUS has used in other cases, involving independent auditors and ringfencing of data from Chinese parent companies. That outcome would be less dramatic but arguably more durable than a forced sale that ends up contested in the courts for years.
Reasonable people can disagree about where the line sits between protecting citizens' data and maintaining the open investment environment that has made American technology so globally dominant. What seems clear is that the era of frictionless Chinese investment in Western digital infrastructure is over, and the gaming industry, long assumed to be beneath the notice of geopoliticians, is finding that out the hard way.