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The White House is debating whether to allow Tencent, the Chinese tech and gaming company, to maintain stakes in popular video game groups as Donald Trump prepares to meet Xi Jinping in China in April.
Top officials have held meetings to decide whether Tencent’s investments in US and Finnish groups — which have helped make it the world’s biggest video gaming company — pose a security risk, said several people familiar with the internal deliberations. Several cabinet officials planned to discuss the matter on Tuesday but postponed the meeting because of scheduling issues.
Tencent holds a 28 per cent stake in Epic Games, the North Carolina-based creator of the hit title Fortnite. It also owns Riot Games, the Los Angeles-based developer of League of Legends, and Supercell, a Finnish mobile gaming group that developed Clash of Clans.
One person familiar with the state of play last summer said Tencent at the time was negotiating measures with the Committee on Foreign Investment in the US to mitigate Washington’s security concerns.
The debate comes three weeks before Trump is scheduled to fly to China to meet Xi. Beijing has repeatedly criticised the US for taking security measures that impact Chinese companies.
Tencent’s gaming investments have become one of the longest-running reviews by Cfius, a Treasury-led panel that vets inbound investments for security risks.
In the first Trump administration, Cfius started to question whether Tencent’s investments in Epic and Riot would provide the Chinese company with access to the data of millions of Americans.
Tencent’s acquisition of Supercell drew scrutiny from Cfius despite the group being based in Finland because of its substantial US user base.
“These platforms could serve as a significant intelligence collection source,” said Chris McGuire, a former official in Joe Biden’s administration who dealt with technology and security issues.
Cfius grappled with the issue throughout the Biden administration. Lisa Monaco, then deputy attorney-general, wanted Cfius to force Tencent to divest the gaming companies. But Treasury preferred an arrangement that would allow it to retain the investments by creating data protections.
“Clearly the biggest national security issue in the area of gaming is data privacy and security,” said Peter Harrell, a visiting scholar at Georgetown University who was a senior White House national security official when the Biden administration was debating the issue.
The administration did not reach a decision because the different agencies that are represented on the Cfius panel were unable to reach consensus, according to former officials.
In Biden’s final month in office, the Pentagon put Tencent on a list of companies with alleged connections to the Chinese military. Tencent has denied having any military connections.
During the Cfius debates, some officials asserted it was possible to mitigate the threat. But others argued the investments posed too much of a risk because the gaming groups collect lots of data on users, including financial information, personal details and information in game chat logs.
The people familiar with the Trump administration’s scrutiny of Tencent’s gaming investments cautioned that it was unclear if the US was more likely to force divestitures or allow the investments to stand.
McGuire, now at the Council on Foreign Relations, said: “Approving this deal, even with mitigation agreements, could send a broader signal that investment from ‘Chinese military companies’ does not carry national security risks, which is certainly not the case.”
The focus on Tencent also comes several weeks after the Pentagon added Alibaba, the ecommerce giant, and BYD, the world’s biggest electric-car maker, to its blacklist.
But the Pentagon abruptly removed the list within an hour of releasing it, a move that has sparked speculation that the administration may be trying to reduce friction ahead of the visit.
The Treasury declined to comment on the Cfius case. Tencent, Epic and Riot also declined to comment. Supercell could not be reached for comment.