Tencent struck hard by new Chinese regulation
Tencent’s WeChat micro-blogging content and e-commerce model under fire by government regulation to reduce financial risksBy Theon Leong 18 Mar, 2014
In the wake of its strategic alliance with JD.com to take on Alibaba, Tencent is facing a new challenge in the form of increased regulation of its content by the Chinese government and its central bank.
Under the new law, Tencent’s WeChat will not be able to use its QR codes any longer or carry out its plan for virtual credit card payment systems. In addition, content from micro-bloggers will also be more tightly controlled, at the risk of offending its current user base of 272 million.
How is WeChat a threat to the Chinese government? Chinese Premier Li Keqiang said last Wednesday in a national announcement that Beijing is highly attentive to financial and debt risks. Recently, Tencent and competitor Alibaba had announced virtual credit cards to allow consumers to purchase goods on credit even more easily. This would have no doubt alarmed the Chinese government, as the conventional credit granting process by traditional banks would become less regulated, resulting in China having less control over its financial risks. According to Bloomberg, the suspension of virtual credit cards and QR codes is meant to regulate the internet finance industry and protect consumers.
In terms of its chat platform, Tencent was forced to shut down or suspend a dozen popular public WeChat accounts with hundreds of thousands subscribers, according to the South China Morning Post.
Tencent added on one of its official micro-blogs that the company would strike hard and deal with banned content. According to Reuters, Jerry Huang, a Shenzhen-based spokesman for Tencent, said that “as part of the commitment to providing quality user experience on Weixin (WeChat) in China, we continually review and take measures on suspicious cases of spam, violent, pornographic and illegal content.”
This is not the first time authorities have demanded increased regulation on content. In January 2013, users were blocked from sending messages with the words ‘Southern Weekly’, which was in open revolt against press control in China. Investors have not taken this news well as Tencent’s stock has closed at HK$565 (US$ 73) on March 14 from HK$620 (US$80) on March 11, 2014 on the Hong Kong trading exchange when this announcement was made.