According to TheVerge report, on August 6, local time, the Trump administration issued two executive orders against Chinese technology companies.
After the deadline of September 20, the United States was prohibited from dealing with these companies. Trading. The current focus is mostly on TikTok, but the ban on WeChat may have a more unpredictable impact. The order prohibits “anyone from conducting any transaction related to WeChat.”
Tencent is one of the world’s largest technology companies, and it has been acquiring equity in video game studios, music companies and social media applications in the past few years . Its scale is larger than Bytedance, and it has a large number of ownership shares in companies such as Snap, Blizzard, and Spotify, and is much more embedded in the global technology industry. Yesterday’s order makes these connections even more dangerous, even if they do not fall within the narrow legal consequences of the order. As Tencent responds and its business partners are forced to choose sides, the consequences may be much broader than the White House realizes, and the damage to ordinary consumers is much greater.
Currently, the main focus is on WeChat, Tencent’s chat application in China. An anonymous White House official told the Los Angeles Times reporter Sam Dean that the executive order was aimed specifically at WeChat. However, before the end of the 45-day grace period, we still don’t know which “transactions” are truly prohibited, for example, whether it applies to funds sent via WeChat, or whether it applies to transfers between Tencent subsidiaries . “We are reviewing the executive order to fully understand the situation.” A Tencent representative told the New York Times.
WeChat is China’s most important chat application and a ubiquitous tool for payment, shopping and business transactions . Many companies, large and small, almost operate through it, and its huge footprint in China has also led to some spillover use in the United States. (Analysts estimate that there are about 1.5 million WeChat users in the United States and 1 billion in China). If the order only prevents Americans from using WeChat, the impact will be quite limited.
But even if President Trump meant to limit influence to WeChat, it is not clear whether he can do so. The wording of the order is very broad, citing the International Emergency Economic Powers Act, which prohibits “any person, or any property, within the jurisdiction of the United States, with Tencent Holdings Co., Ltd., or any subsidiary of the entity confirmed by the Secretary of Commerce Conduct any WeChat-related transactions”. Before law enforcement begins, people will not know how the Ministry of Commerce will strictly enforce this rule.
Most of the impact will also be outside Trump’s control. I don’t know how banks and app stores will respond to this order, nor how Tencent itself may retaliate. Any company that owns shares in Tencent may be implicated, because in the global economic crisis, Tencent’s sudden departure from the market may throw their financial situation into chaos. It’s difficult to say exactly what impact it will have, but the company’s investment range shows how ugly things can get.
The following is a non-exhaustive list of companies owned or invested by Tencent:
- Tencent owns 100% of Riot Games, the developer of “League of Legends”.
- Tencent is the largest minority shareholder of “Fortnite” and Unreal Engine developer Epic Games, holding 40%.
- Tencent owns more than 80% of Supercell, which is the studio behind Clash of Clans.
- Tencent publishes the mobile version of “PUBG” in China and holds more than 11% of the shares of developer Blue Hole.
- Tencent has single-digit shares in multiple game studios, including Blizzard, Ubisoft and PlatinumGames.
- Tencent also has a messaging app called QQ with hundreds of millions of users.
- Tencent’s production company and distributor Tencent Pictures participated in major Hollywood productions such as “Wonder Woman”, “Venom” and “Terminator”. It also serves as a major domestic film distributor and holds a minority stake in a series of small production companies.
- Last year, Tencent and the NBA reached a five-year agreement worth US$1.5 billion to broadcast their games in China.
- Snapchat’s boss, Snap, sold 12% of its shares to Tencent in 2017.
- Tencent owns approximately 14% of Kakao, which operates the Kakao gaming platform and Kakao Talk, the most popular chat application in Korea.
- This year, Tencent acquired a 10% stake in Universal Music Group.
- Tencent holds a 9% stake in Spotify, and the two jointly launched Tencent Music in China.
It should be noted that Trump’s order does not mean that the new “Top Player” will immediately disappear from the release plan, nor does it mean that Snap will be kicked out of the App Store. But doing business with Tencent has only become more complicated, and it is possible that many companies’ transactions will fail because of this.
In the game field, this impact is particularly serious. If the bank stops transmitting payments to Tencent, companies like Riot and Supercell may be immediately affected, while games like League of Legends and Clash of Clans may face operational problems that have never been dealt with before. Even if the White House does not plan to remove them from the App Store, these decisions will ultimately be made by Apple and Google.
It is also unclear whether the limited ban makes sense. If the ban is limited to WeChat, then the obvious question becomes why the Trump administration would feel at ease with such a deep involvement of so many companies operating in the United States by Tencent. For example, the concerns expressed about TikTok sending user data to China can certainly apply to League of Legends and other games.
Even if the impact is limited to WeChat, it will leave Apple in a unique dilemma . The company has emphasized WeChat in its keynote speeches and product demonstrations for many years. If Apple is forced to remove WeChat from the App Store, Chinese consumers will stop buying iPhones. An iPhone without WeChat is not even as useful in China as a Huawei phone without Google in the West.
Naijatechnews understands that the impact of the administrative order is not fully understood. But obviously, this is a huge provocation to Tencent, and there may be more provocations in the future. Although TikTok may receive mainstream attention in the United States, the aftermath of this attack on WeChat may be much larger. It will be more difficult for overseas Chinese in the United States to communicate with relatives, and it will be more difficult for American companies to reach Chinese consumers. And if the Trump administration can deal with WeChat, what other properties of Tencent will be next?
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