Tencent, the Chinese internet giant behind the popular app WeChat, has been designated a "Chinese military company" by the US Department of Defense, a move that could have significant implications for its investments in US tech companies and startups. The designation, announced on Monday, serves as a warning from the US about companies it claims are involved in Chinese "military-civil fusion" efforts.

The listing does not specify why the US believes Tencent is helping the Chinese military, but Tencent has strongly refuted the designation, calling it a "clearly a mistake" and stating that it is "not a military company or supplier." The Defense Department did not respond to a request for comment.

Tencent has been an active investor in the US tech scene through its Tencent Exploration Team, which operates out of Palo Alto and has invested in companies such as Snap, Epic Games, and insurer Oscar Health. Tencent is also a major shareholder in Reddit, although its stake recently dipped below the 10% threshold. Investing in global tech companies, particularly in sectors like health and video games, has long been a focus of Tencent.

The designation could harm Tencent's investing activities in the US, as founders may become wary of accepting funds from a company officially linked to the Chinese military, even without public evidence. There is also a risk that this measure could result in pressure for further sanctions against Tencent from other parts of the US government, such as the Treasury Department.

The move is part of a broader trend of US-China decoupling, which has been accelerating in recent years. It was once relatively common for Chinese venture capital firms to invest in US companies, and vice versa, but those days appear to be coming to an end. The designation of Tencent as a "Chinese military company" cements this trend, making it increasingly difficult for Chinese companies to invest in US tech.

The implications of this move are far-reaching, and could have significant consequences for the global tech industry. As the US and China continue to diverge, it remains to be seen how this will impact the flow of capital and innovation between the two countries.