JOHANNESBURG — Some businesses become too big too manage, while others grow into areas that lead too heightened government scrutiny. And according to the Wall Street Journal article below, it seems Tencent may be encountering the latter. The company’s billion strong WeChat app is becoming a concern for Chinese authorities, as the technology powerhouse could be a threat to the Communist regime, accustomed to a tight handle on the country’s communications. Something for Naspers shareholders to keep an eye on given the JSE-listed company’s 31.2 percent stake in the internet giant. – Stuart Lowman
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For China, Tech Giant Tencent Is Both a National Champion and a Threat
WeChat , TCEHY 2.31% which has more than a billion users, in recent years has emerged as the main conduit for personal, business and institutional communications in China. That makes Tencent a national champion – a technology powerhouse that can stand with the world’s best, but also a threat to a Communist Party accustomed to keeping tight reins on the nation’s communications.
“There is an inherent conflict between Tencent’s business and the government,” says Matthew Brennan, a China tech consultant.
People use WeChat TCEHY 2.31% to send texts, pay bills, stream entertainment and play games – and to share news stories and opinions. But Chinese regulators are mostly concerned about WeChat being used to spread “fake news” and antigovernment comments, along with the use of false online identities to cloak dissident activity, say people with knowledge of the company.
By law, Tencent is responsible for keeping illegal content off its news feeds and other platforms – including anything that endangers “national honour and interests” or undermines “national unity.” China’s new cybersecurity law also requires companies to police their web platforms for illegal content, and Tencent has been penalised at least twice for violations since the law went into force last year.
Incursions from government regulators go beyond WeChat. Tencent also has a big presence in gaming and mobile payments, and last year, state-run media attacked the company’s top mobile game as addictive “poison.”
Tencent declined to comment. The Cyberspace Administration of China, which oversees internet content, didn’t respond to a request for comment.
WeChat has measures in place to prevent people from using the platform to organise large groups, which is believed to be why China blocked Facebook, Twitter and other Western social-media platforms in 2009. No official reason was given, but it followed state-media reports blaming social media for fomenting unrest among China’s Muslim minority.
On WeChat, chat groups are limited to 500 members, and once a group tops 100 members the account of each new member must be linked to a verified mobile-phone account with a state-owned telecommunications company.
There is a perception among many in China that WeChat is monitored by the government, and Chinese activists and others say they have been questioned by authorities over what they thought were private comments on the app.
Tencent says it doesn’t store WeChat messages on its servers and authorities don’t have access to them. Yet messages aren’t encrypted in the same way they are on Facebook’s WhatsApp; people familiar with the matter say Tencent can save and hand them over at the request of police.
What is more, the mere perception that the government has access to WeChat data is a hindrance to its growth overseas, people close to the company say. These concerns come as U.S. technology companies like Facebook Inc. too are fending off government inquiries on use of customer data and other issues.
All big tech companies in China, including Tencent rival Alibaba Group Holding Ltd., face government scrutiny. But the scrutiny on Tencent is more intense given WeChat’s role as a social network.
“Alibaba is just a consumer service where you buy and sell things,” said X.L. Ding, a social science professor at Hong Kong University of Science and Technology. “Tencent is different because it has a function of propaganda and spreading information.”
As government scrutiny has intensified, Tencent Chief Executive Ma Huateng, also known as Pony Ma, has stepped up to serve as its point man with regulators. While not a Communist Party member, the 46-year-old billionaire has been an active participant in China’s National People’s Congress, the party’s tightly controlled annual political meeting.
Mr. Ma and other executives are spending more time meeting government demands, according to people close to the company. Regulatory changes and other actions that could impact Tencent’s products and services come up frequently at board meetings, these people say.
Chinese tech companies Alibaba and Tencent have emerged as global leaders in mobile-payment technology. This animated video charts the key steps along their rise to the top.
“He’s an introvert, but he’s accepted what he needs to do,” one Tencent executive said of Mr. Ma’s lead role in dealing with high-ranking government officials. The executive added that Mr. Ma would much rather be immersed in developing new products and services. Mr. Ma declined to comment.
His myriad NPC duties this March forced Tencent to delay release of its annual results; it would be hard to imagine an American company doing the same because its chief executive was away at a political convention.
Mr. Ma moves quickly to get his company out of the crosshairs. Last year, the Communist Party’s People’s Daily newspaper published scathing editorials about Tencent’s game Honor of Kings, saying school children were dozing in class because they stayed up late playing the game. Tencent’s shares fell more than 3% on the Hong Kong stock exchange.
Tencent slapped limits on play time for anyone under 18, and Mr. Ma traveled to Beijing to make peace, posing for photographs with People’s Daily executives at the newspaper’s offices. Its shares reversed their decline.
“The company is showing they implicitly understand the agenda of the people who…regulate them,” said Richard Kramer, founder of Arete Research who has followed Tencent for years.
Tencent, which has more than 45,000 employees, recently began moving into a new $600 million Shenzhen headquarters, a futuristic complex with skywalks linking twin skyscrapers.
The architects had a bold plan for the executive suite. They wanted to station Mr. Ma and his top lieutenants in a central command post with high visibility, like the bridge on a battleship.
That wouldn’t do, architects were told. One reason: Too many government officials come calling, and their visits need to be discreet. The executive offices were placed instead in the upper reaches of the highest tower.
— Xiao Xiao in Beijing contributed to this article.
Write to Wayne Ma at [email protected] and Alyssa Abkowitz at [email protected]
