Announcement of WeChat Ban Causes Major Concern in the Tech Industry

By Adriaan Brits Friday, August 21, 2020

On August 6, the White House declared a ban on China-based apps TikTok and WeChat. The company that owns WeChat, Tencent, took the hardest blow, as its stocks plummeted as low as 10% in Hong Kong the following day and lowered a further 5% when closing.

The ban caused alarm in the tech industry, along with the numerous US companies that typically rely on the apps to export goods to China.

WeChat Set to Follow TikTok

The decision to take action against the world’s most popular messaging app, WeChat, came following the ruling against TikTok, which was accused of compromising national security in the US by the White House.

But, as opposed to TikTok, which is an app meant for entertainment, Tencent is widely utilized in marketing products by American corporations. A major example of this is Apple, a company with most of its iPhones and gadgets manufactured in China, where WeChat prevails as a mode of communication.

The banning of WeChat might lead to significant drawbacks such as American brands not being able to sell their products and services to buyers in China, which was made possible by WeChat’s mini-programs. WeChat and its mini-programs are currently one of the most rapidly growing platforms for ecommerce.

“The World's Greatest Games Publisher”

Tencent, aside from owning WeChat, in 2019, obtained the ranking of being the world’s greatest games publisher. With collaborations with large gaming industries such as Entertainment Arts Inc. and Activision, as well as holding a significant amount of stocks in Epic Games Inc. and Riot Games Inc.

With such deep involvement with huge US names, significant damages were expected after the ban was announced. However, it was later clarified by a US official that only the messaging service would be affected and not its parent company. Despite that, Tencent will be forced to sell its US gaming assets.

Trump based his decision on the claim that the apps compromise national security and could further abuse the personal information collected from its users — notably their location information and their online browsing activities — in the form of blackmail and corporate surveillance. WeChat users in the US had to resort to posting their contact info so that their family and peers could connect with them if the app got removed abruptly.

The apps WeChat and TikTok would be banned from functioning in the US in 45 days if not sold by their parent companies.

Questions Raised For Other Major Chinese Tech Organizations

The White House’s decision to ban TikTok and WeChat further raised a lot of concern for other big China-based tech companies (i.e., Alibaba and Huawei), which could also come under fire with the ban being imposed. This is because the US government suspects that the ecommerce titan could also abuse its users’ personal data. The platform currently has ten-million active customers buying goods through it globally, including the US. The site traded goods valued at one trillion over the 12 previous months through March.

SoftBank, Alibaba’s primary stockholder and owner of over 25% of the company, had its stock decline in Tokyo, losing more than 3% this week. Alibaba and Tencent also currently have other major financiers, including BlackRock, T.Rowe, and Vanguard. US corporations that use Alibaba’s cloud computing services to carry out their operations online are also left vulnerable after the President’s decisions.

Secretary of State Mike Pompeo shared that the “Clean Network” program introduced by the White House is aimed to prevent the private data of US citizens from being uploaded on cloud-centric systems that are used by companies such as Baidu, Alibaba, and Tencent.

With China already having banned the use of Facebook and Amazon and replacing both sites with their local ones, such as Tencent for social media and Alibaba for ecommerce, US authorities consider the bans to be mutual.

This week, on Friday, China’s Ministry of Foreign Affairs stated that it is against the banning of WeChat and TikTok, their representative Wang Wenbin saying that the US is oppressing foreign business using state authority.

About the Author

Headshot of author Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

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