Fine for Tencent – Are the Chinese actually fighting technology?
Chinese regulator decided to charge payment technology WeChat Pay with money laundering, resulting in a steep fine for Tencent Holdings. The company’s shares plunged by 10 percent. Whether it is a right decision in defence of security and rights of citizens?
In the Western culture it is difficult to understand some of the mechanisms that drive the authorities across the eastern border. Differences in culture and approaches to governance create a huge stratification between the likes of Europe, Russia or especially our main hero today – China. The Middle Kingdom seems to be openly hostile to private business initiatives occurring on its territory, especially when it comes to technology companies. Although we may wonder about antagonizing the East when we see similar actions in the European Union or the United States.
In an interesting entry of the Liberty Institute we can read about the opinion that capital has a nationality. As one Bankier analyst rightly points out.en we cannot speak here about the literalness of this saying. Nationality is a feature of the owners trading the assets in question, not finance per se. To be precise, this is about a m.in. o situations cited by the Jagiellonian Club in which: Poles have long reported investment discrimination in other countries.or those where companies support NGOs in their own country; or those where large corporations set up central offices, development centers and large factories in their home country. Most likely, this is not the aftermath of any noble patriotic ideas, but a simple pragmatism, the result of which, in case of problems with the functioning or bankruptcy faster and easier to find help in the mother country. It is no different in China, and pragmatic thinking is in the country’s blood, so it is not surprising that the Chinese have their biggest mega-majors at home.
What is the problem??
Problems arise when Chinese corporations interfere with the authorities, want to move their capital or threaten government interests with their technology. As Mateusz Janicki explains in Parkiet.com fight against corporations has been going on for a long time, but it gained momentum when Jack Ma dared to loudly criticize Chinese banking policy at the end of 2020. The billionaire who founded Alibaba not only couldn’t make his financial debut with Ant Group because of it, but he was declared missing in December 2020. The billionaire quickly returned to the stool, on which he sat probably having seen the fine of 18.2 billion yuan.
Radosław Pyffel also reminds us of the case of Tencent Music Entertainment Group. The group owns 80% of. China’s music streaming market. Tencent also secured for itself the rights to own music of certain artists only on an exclusive basis on its own platform, which did not please the authorities. They gave the group a month to back out of exclusive music rights. By the way, China’s regulator has banned the Shenzhen-based company from merging with Huya. This step stopped the development of the company in the sector of video games. The action also lowered the companies’ market value – Tencent Holdings Limited shares fell nearly 6 percent on the Hong Kong Stock Exchange., and Tencent Music Entertainment Group less than 7 percent.
In June 2021, we could also see the debut of China’s Uber on the U.S. exchange, Didi. The Middle Kingdom then initiated proceedings over the company’s collection of user data. By August, Didi shares were already up 30 percent. lower. Janicki describes this as a warning to Chinese entities looking to go public in the US.
Chinese delivery giant Meituan has also come under fire. After the company’s CEO, Wang Xing, shared a poem from the Tang Dynasty that referred to burning books and burying scholars alive, the company was in trouble. A quick deletion of the text from social media didn’t help. The entry was seen as a criticism of Xi Xinping, prompting the state to launch antitrust proceedings against Meituan.
Another case, also described by Mobile Trends editors, is the attack on video gaming, which has become a “spiritual opium”. Tencent then announced the introduction of gameplay limits to the max. 1h a day, and people under the age of 12 have been blocked from buying items on the app.
Tencent is not liked by the regulator?
Restricting market value, speculative attacks, antitrust proceedings, fines – this is how Tencent Holding’s relationship with its country’s authorities shows up. Another crack appears in the image of the relationship between these two entities. As Bloomberg reporters report, Tencent Holdings Ltd. posted another 10 percent. losses when it was announced that WeChat faces a record fine for violating China’s anti-money laundering laws. Unlike operators Alibaba and Meituan, the WeChat feature has yet to be vetted.
The People’s Bank of China, the central bank institution of the People’s Republic of China with the power to control monetary policy and regulate financial institutions, discovered that WeChat Pay allows the transfer of funds for illegal purposes such as gambling. The alleged whistleblowers were not identified, however, after a routine inspection of the payment platform in late 2021. Authorities announced that they had discovered major irregularities.
As we know, authorities in Beijing are conducting an intensified anti-money laundering effort to increase budget revenue and reduce citizens’ social risk in the face of illegal activities. Early this year. LBC announced that a massive information and operations campaign would be launched in the country that would significantly reduce the possibility of money embezzlement by 2024.
The inspectors are prompting China’s BigTech to stop monopolistic and competition-threatening activities, which resulted in WeChat allowing external links to apps operated by Alibaba and ByteDance that were previously blocked on the platform. It is now speculated that Xi Jinping is noting the closed WeChat system, which covers all digital activities and accounts inside the app.
Cunning Central Bank?
By 2021, according to Bloomberg, WeChat Pay was responsible for up to 40 percent of. mobile payments in China, second only to the Alipay service. Recalling the words of Paul Triolo, head of the geotech practice at Eurasia Group, in which he stated that the value of e-CNY cash circulation will not be able to match Tencent’s or Alibaba’s payment app, we can take a peek at the Chinese central bank’s digital currency project.
After a high-profile but ultimately underwhelming debut for one of the country’s most important projects, Xi Jinping’s administration may want to reignite more confidence and the legitimacy of using a domestic clearing project. The private players here are a huge competitor to the Chinese currency. We may wonder to what extent China is playing to the advantage of the market and citizens, and to what extent it is thinking about its own wallet, in this case digital.
Are the Chinese actually sabotaging their tech sector?
Before we begin our ostracism of China’s treatment of capital, we should look at our home turf. I guess everyone remembers the Turów mine cutbacks or the European Commission’s categorical order against Orlen, which it ordered to sell almost 400 Polish stations, or 80 percent of. of all Lotus stations, at the time of the merger. One can also cite the example of the EU imposing regulations on American corporations, but a large number of analysts see this as an element of a competitive trade war, with the rest not being domestic. It is different in the case of U.S. BigTech, which directly brought the heavy guns against Trump when he was president, or the broad legislative actions of the G7 group of countries establishing a new international order regarding the payment of taxes by digital corporations, which will also affect parent companies. Turning to China, analysts at Parkiet.coms note that they may be acting in this way to curb consumer-focused tech companies. It is supposed to draw capital away from this sector, which would go to the development of equipment. Less immersion of people in digital also means that more of them are likely to work on their own and product development , which is expected to contribute much more to long-term GDP growth. This would also explain the Chinese authorities’ warning over the piling up of trademark applications dot. metaverse. Some speculate that China would like to have more capital in Hong Kong and Shanghai itself, which are home to many semiconductor, solar panel and biotech companies. Taiwan, which stands on semiconductors and these are key to the country’s continued economic growth, may also prove crucial for the Middle Kingdom. Whatever one may say about curbing innovation and fighting technology, China’s regulatory actions and policies seem to be thoughtful and balancing the influence of politics and business. Long term, limiting the monopoly and actually acting against dirty financing may actually do some good economically, while we sit around wearing AR glasses at Meta, which has now been ridiculed so. China’s civilization has always been a majestic and hermetic empire that has had its ups and downs, but its traditions and resourcefulness should not be forgotten. In the context of what is visible, we see a battle for the government of souls between corporations and governments. The skirmish has been overt for quite some time. One has the technology and the other formulates the laws and restrictions. Hardly any citizen or customer believes in a selfless fight for their welfare.
Each player wants to extort as much as possible for themselves, and the pieces of the puzzle continue to form with interactions. The giants’ grip is tightening on us, however, as we end up footing the bill for higher taxes or technology restrictions as a result of government actions. How the market and politicians will shape the economy and society in China is one thing, but how western companies and our politicians will affect life in Europe is also a question that is increasingly worth pondering.