Since the series of regulatory (and ‘national security’) actions by Chinese authorities, investors and observers are very nervous about any sign of the next trouble.
In particular, Tencent, which has thus far not been targeted by such actions. Only minor issues such as M&As and Tencent Music Group’s exclusive distribution rights have featured in government sanctions/fines.
Therefore, when the news came out today that WeChat is suspending new user registrations, people became nervous. They are afraid that Tencent might be going down the Didi route.
However, after speaking with a few sources, we discovered that this is actually not as serious as you might think. As the Army Day is coming on 1 August, there is imperative to prevent sensitive information from being leaked. As simple as that.
In the long run, however, WeChat’s scale and importance will probably invite some scrutiny from a national security point of view. Tencent has thus been doing a very good job managing the government relations, maybe they will figure out how to solve that debacle too.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].