Business & Economy

Losses, forced sale and lawsuits: TikTok, WeChat face crisis after US bans

By Victor Escribano

Beijing, Aug 18 (efe-epa).- The bans announced by the President of the United Sates Donald Trump on Chinese social networks TikTok and WeChat have triggered a wave of uncertainty for the two companies with speculation over multi-million dollar losses, forced sales, legal options and possible retaliation.

Trump signed a executive order on 7 August to ban “transactions” — as yet unspecified — with the two applications and their developers ByteDance and Tencent, effective in 45 days.

The order cited national security threats over the alleged collection of personal data by the apps that could be shared with the Chinese Communist Party.

TikTok had become one of the biggest global success stories for the Chinese tech sector in recent years, while Tencent is a digital giant in its own right with an estimated net worth of over $695 billion. The impending bans could affect the two ventures in different ways.

Earlier this week, Tencent said that less than 2 percent of its total income originated from the US market, with the share dropping to less than 1 percent in the advertising revenue segment.

Similarly, a large number of WeChat users in the US are Chinese immigrants or students.

However, Tencent is much more than just WeChat, and the company has in recent years invested millions of dollars in multiple international companies such as the US-based Tesla, especially focusing on the video-games and entertainment sectors.

The company possesses a stake in studios that produce well known games such as World of Warcraft, Fortnite, or League of Legends and controls 9 percent shares in music platform Spotify.

“These sectors have been excluded in the executive order so far. It is not clear if Tencent would be forced to get rid of these investments. And if the executive order is extended to include gaming companies fully or partially owned by Tencent, the financial impact would be much bigger than banning WeChat,” Alicia Garcia Herrero, the Asia-Pacific economist at French consultancy Natixis, told Efe.

A Tencent spokesperson told Efe that the group was “analyzing the possible consequences” of the US measure to “understand its impact better.”

Garcia Herrero insisted that Tencent had a symbolic value in the US.

“It is not just any platform. The amount of information it gathers is gigantic, moreover it’s a flagship Chinese company in payments and social networks. It’s a symbol of Chinese innovation and ‘soft power’ and therefore a problem for Trump.”

In the case of ByteDance, the company is yet to be listed amid rumors of a possible IPO in Hong Kong this year and is not required to make its results public.

According to mobile apps consultancy Sensor Tower, the US was the third in the list of countries with most TikTok downloads with around 165 million installations.

The company claims it has around 100 million American users and generates around 19 percent of its revenue from user spending, amounting to around $86.5 million.

Although the US ban has grabbed more headlines due to the backdrop of the US-China trade and tech war, TikTok already suffered a major setback earlier this year when it was banned — along with WeChat — in India, its biggest market with around 611 million downloads.

The loss of its user base in the world’s second most populated country could result in revenue loss worth $6 billion, according to digital newspaper Caixin.

However, Liu Jing, a professor of accounting and finance at the Cheung Kong Graduate School of Business , ruled out the possibility that the US and Indian bans could entirely sink ByteDace.

He said it was “unlikely” that other countries would take similar measures and ByteDance would survive even if it lost most of its overseas businesses as it had significant presence in the Chinese cyberspace, the largest in the world.

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