After TikTok, WeChat has also suffered a huge crisis in overseas markets. Beijing time on August 7, U.S. President Donald Trump signed two executive orders announcing that any U.S. individuals and businesses will be banned from doing any transactions with Byte Dance, the parent company of TikTok, after 45 days, and prohibiting U.S. individuals and businesses from doing any thing with WeChat.
The core of Trump’s executive order against WeChat.
Tencent’s share price fell by more than 10 per cent on August 7th, wiping HK$500bn off its market value, according to the bank’s announcement.
Tencent Holdings narrowed its decline aftermedia clarified that the ban was only aimed at WeChat. By the close, the share price had narrowed to 5 per cent.
On the evening of July 7, Tencent Holdings issued a clarification announcement on the Hong Kong Stock Exchange: We note that on August 6, 2020, the President of the United States of America issued an executive order prohibiting certain transactions related to our WeChat applications that are subject to U.S. jurisdiction. The Company is reviewing the potential consequences of the Executive Order in order to gain a more full understanding of its impact on the Group. The Company will make further announcements in due course.
Tencent’s announcement in response to WeChat’s ban.
Before the share price plunge, Tencent had a market capitalisation of $686bn, making it the eighth-largest company in the world. Tencent’s share price has risen 40.83 percent since the beginning of the year.
What are the limits of administrative orders?
New York State practicing lawyer Gao Xibai further explained to Titanium Media App that the executive order affects WeChat’s services in the U.S.: there are big problems with operations, normal business activities, and so on. “Even Tencent’s rental in the U.S. can be a problem.” In line with Byte Dance’s earlier response, Gaucibai also argued that the “reports” cited in the presidential order were unverified and not investigated.
Mr Gao said the provisions of the executive order provided some explanations:
The person who applies the prohibition includes individuals and entities, including U.S. citizens, permanent residents (green cards), entities incorporated under U.S. law, and individuals on U.S. territory;
Entities include governmental organizations, institutions, partnerships, associations, trusts, companies, groups, etc. and even international organizations;
The specific transactions prohibited will be explained by the Commerce Secretary after 45 days.
He said the White House cannot directly prohibit citizens from using a social platform or app, including voice-shaking or WeChat, because of restrictions on government power under the U.S. Constitution, but the White House can isolate, restrict and sanction corporate entities or even a country in the name of national security.
Is it illegal to send red envelopes or transfermoneys between WeChat accounts?
From the language of the executive order itself, this is not illegal. The executive order prohibits transactions with Tencent or its subsidiaries (with Tencent Holdings Ltd.). , Shenzhen, China, or any subsidiary of that entity), does not prohibit all transactions made through WeChat.
Is the RMB balance in our WeChat payment account legal?
The yuan in the account is not in itself illegal, but transferring or transferring balances from a bank or credit card to a WeChat account, or purchasing Tencent’s services on WeChat, such as WeChat Out, may technically constitute a transaction with Tencent, thus violating the executive order unless the U.S. Secretary of Commerce’s explanation expressly excludes it.
Is it illegal to have a WeChat account?
No violations. While owning a WeChat account is essentially a deal with Tencent, the White House is legally incapable of prohibiting citizens from using a social application, so the executive order deliberately makes it clear that the ban applies only “to the extent permitted by the relevant law.”
Risk One: WeChat is banned in the United States, affecting the lives of Chinese and international students.
According to Zhixiang.com, weChat has about 1.48 million active users in the United States, one in half of whom are Chinese students and the other is chinese who work and live in the United States. They had all relied on WeChat and family and friends to keep in touch. WeChat is almost the only way they can connect with their family in China. In addition, some Americans who do business with Chinese companies are also expected to be affected.
Anxiety had spread among overseas populations before the executive order was officially issued. Many students in the U.S. have left other alternative contacts, such as WhatsApp, Twitter and Line, in their circle of friends.
In mid-July, a document provided by a netizen, WeChat Group AfterCare FAQ, was forwarded to the Chinese community. This paper suggests a series of things such as How WeChat Group and WeChat Wallet Are Handled.
“WeChat is blocked mainly because it’s not convenient to have personal contact, to work more with email or co-working software.” “A lot of friends have taken the initiative to add WhatsApp and Line, but if I contact the country, I might teach my family to use Line and find alternatives,” Li, who works in the U.S., told Titanium Media. “
In addition to the blocking of private communications, weChat-based overseas self-media people have also been hit.
“Since most of the readers are overseas Chinese, if WeChat is banned, the public number for overseas Chinese is basically null and void,” a self-media source said in a post today. “So he’s also looking for new channels of communication with readers.
Overseas self-media sources are also looking for alternatives (Source: Public Content)
“WeChat is an important way to get information. It’s really a pity if it’s banned. Li Bei told Titanium Media.
However, in line with previous Indian precedents for banning WeChat, WeChat, which is registered with a Chinese mobile phone number, may still be able to use it normally after the US number registration is blocked.
In addition, a Southeast Asian entrepreneur replied to the titanium media said that not only friends in Southeast Asia and friends in the United States, we all think WeChat will not be blocked, so “we do not have too much talk about the topic of unsealed WeChat.”
The person explained that the explicit ban was “to conduct WeChat-related transactions with Tencent” rather than to say that WeChat was banned in the United States.
Risk two: WeChat is off-shelf by the app store, users face “Apple, WeChat two pickone”
The executive order does not rule out further requirements for Google and the Apple App Store to take off our WeChat in the United States.
The People’s Daily, which analyzed TikTok, cited legal sources as saying that under the presidential decree, the U.S. government would be able to order Apple and Google’s global app stores to list all of Byte Dance’s products. The command can even be covered by the App Store in China.
But compared to Apple phones, Android phones have a relatively small impact, and there are other ways to install them.
On the 7th, The founder of Gronhui, Giron, also tweeted that, in the wording of the executive order, it would most likely lead Apple APP to go directly off weChat, rather than what mainland investors understand, but Americans can’t download it, and people in other regions can still download it normally.
According to him, once it’s completely off the App Store, it’s also a threat to Tencent’s revenue.
“Because if it’s not completely off the shelves and weChat download users in other parts of the world pay, Tencent will still split with Apple.” And that’s a clear violation of what the presidential decree says, and U.S. companies can’t do business with Tencent. In extreme cases, this means that half of Tencent’s revenue streams are under threat. “
But if the executive order does hit the app store, the blow to Apple could be even greater than the blow to Tencent. An Apple spokesman did not respond to a request for comment, Bloomberg reported.
At noon on the 7th, snowball opened the “change Apple mobile phone or off weChat” network vote, attracted more than 800,000 netizens to participate, most of them choose to change the Apple phone.
Snowball launched the vote, and most people chose to change their Apple phones.
Anand Srinivasan, an analyst at Bloomberg Intelligence, said China contributed 20 per cent of Apple’s iPhone sales, so pulling WeChat out of the App Store “will create a serious obstacle” to iPhone sales. Mr Srinivasan also said that most of Apple’s production is in China, and that if China targets Apple’s exports, it will have an impact on the company’s global business. In addition, China may limit the supply of materials such as rare earth metals, which are key ingredients for the iPhone.
U.S. technology stocks fell as of August 7, with Apple’s shares down more than 2 percent at $444.45 a share.
However, Mr Gao told Titanium Media App that Apple’s China App Store may not be affected. The executive order expressly states that it applies to United States companies and individuals on United States territory. Apple’s App Store in China is part of Apple’s China subsidiary and operates on servers outside u.S. territory.
But servers owned or leased by Tencent in the U.S. may be shut down because of the bank’s executive order. Although Us WeChat users can still use WeChat through Tencent’s servers outside the U.S. But in the wake of the recent ban on WeChat in India, Tencent has chosen to shut down weChat use for all users in India to avoid legal problems.
Risk 3: Has a significant impact on Tencent’s U.S. business.
According to a Chinese edition of Bloomberg News, ByteDance’s business outside TikTok is largely confined to China, while Tencent plays a central role in the game’s global distribution and is the main source for U.S. companies to sell products in China.
For example, most of Apple’s iPhones are made in China, and WeChat is like a lubricant that helps the factory floor communicate with the board. In a worst-case scenario, U.S. consumer brands such as Wal-Mart and Starbucks may not be able to sell goods and services to Chinese buyers through WeChat’s “small program”. “Small program” is currently one of the fastest growing channels in China’s e-commerce market. China, which accounts for about 9 percent of Wal-Mart’s international sales, is its fastest-growing market.
The forced sale of Tencent’s gaming assets in the U.S. could yield $22 billion and add to uncertainty about Tencent’s stake in the rest of the world, according to Industry Research analysts Vey-Sern Ling and Matthew Kanterman of Bloomberg. Tencent’s own investments in U.S. companies could be at risk, and it is too early to say what could happen to Silicon Valley.
However, there are also some views that the scope of the executive order will not be extended to this extent.
According to Sam Dean of the Los Angeles Times, White House officials said the presidential order was limited to WeChat and WeChat-related companies and did not involve Tencent-owned gaming companies. However, the reporter’s statement has not yet been confirmed by U.S. officials.
Media reporter said that “the ban is limited to WeChat and WeChat-related companies”
While Tencent’s share price should fall sharply in response to market panic, the impact on Tencent is modest in terms of its social, advertising and cross-border payment stakes if you only consider the impact of banning WeChat.
First, weChat’s use in the United States is concentrated in the Chinese community. Currently, WeChat and WeChat have 1,202.5 million monthly active accounts combined. According to Apptopia, an app data tracking company, WeChat has just 19 million daily active users in the U.S., a tiny fraction of WeChat’s overall user base.
Second, in advertising, overseas WeChat users accounted for a relatively low number of U.S. users, and low level of realisation, after being banned will not have a significant impact on advertising business revenue.
Moreover, WeChat had hoped to break into overseas markets in its payments business. However, WeChat payments in the United States are still limited to the Chinese community, mainly in duty-free shops and Chinese-populated scenic spots.
Currently, WeChat’s cross-border business has been compliant with 60 countries and regions, supporting direct conversion in 16 currencies, with more than 1500 institutions in place, covering millions of foreign merchants. But so far, Tencent has not officially released weChat’s overseas revenue data, and its revenue in the U.S. is negligible.
Moreover, WeChat’s cross-border payments have shifted its focus to Southeast Asia. Online payments in immature emerging markets, including Tencent and Ali, have become the backbone of Internet finance in Southeast Asia.
In addition, in the cloud business, Chinese cloud manufacturers in the United States cloud business revenue is relatively limited, the main overseas revenue from Europe and Southeast Asia markets.
Tencent also has an investment business overseas. By the end of 2019, Tencent had 114 overseas investment acquisitions, including 37 in the gaming sector. According to Huatai Securities, Tencent’s main investment in the U.S. currently accounts for only about 3% of Tencent’s current market value, and the overall risk is manageable.
Fortunately, Tencent’s “cash cow” gaming business is not currently restricted. Even if it is banned, the U.S. accounts for a small share of revenue in the game’s out-of-the-sea business. According to Huatai Securities forecast, last year Q4 Tencent overseas gaming revenue accounted for 23% of the total game revenue, from the United States accounted for about 20% of overseas revenue, accounting for less than 5% of Tencent’s overall gaming revenue, accounting for less than 1% of the company’s overall revenue.
Because of the vague wording of the executive order, everything is not clear. In the United States, as Mr. Gao says, it is not known whether WeChat chose to shut down its services or, like Byte Dance, prepare to fight and sue the U.S. government. And what you can do is to plan ahead and open accounts on other social and communication platforms.
(This article is first published by Titanium Media App, author/Lu Yi, editor/Zhao Yuhang, and Titanium Media author Sun Huixia also contributed to this article.) )