White House’ WeChat Ban Could Impact American Companies In China

Following the signing of an executive order by United States President Donald Trump that could put a ban on Chinese owned short video sharing app TikTok and Tencent owned messaging app WeChat, some of the unintended casualties of this could be American companies in China because on the heavy reliance of these companies on the messaging app, according to experts and analysts.

Announcing the potential ban, the Trump administration labeled the Chinese apps being “significant threats” to the national security of the country.

The extent to which the order, which is to be implemented starting in 45 days, will impact the business of WeChat  ws not immediately clear. It was also unclear whether the ban would impact the some of the large investments made by Tencent in the US as well as in other parts of the world.

But according to Chengdong Li, a Beijing-based tech analyst, U.S. firms such as Walmart and Starbucks could bear a greater brunt if the ban comes into effect as these and some other US companies use WeeChat to do business in China.

WeChat is considered to be an all-in-one mobile app as it incorporates a host of services to its users that are offered by Facebook, WhatsApp, Instagram and Venmo. With more than 1 billion users in China, this so-called super app is almost essential for daily life in the country.

Conducting transactions and engaging consumers in China using the WeChat’s embedded ‘mini-app’ programmes is done by a number of American brands, big and small, from Nike to KFC, Starbucks and Amazon.

WeChat users do not need to separately download retail apps in order to use them because those are stored in WeChat’s cloud and used by user as mini-app programmes.

“The revenue Tencent got from these mini-apps for Walmart and Starbucks is minuscule in comparison to Tencent’s video games revenue domestically,” Li said. “The ban would hurt Walmart and Starbucks more significantly as they rely on Tencent to get traffic.”

The “Scan-and-Go” payment service of Walmart is embedded into WeChat in China while the retailing giant offers this service via its own app in the United States.

More than 30% of its transaction in China comprised of the “Scan-and-Go” payment service in China last year, Walmart said. This service allows customers to avoid check out queues at its stores by using their smartphones to scan the bar code on products and make payments at the same time.

American businesses on WeChat might be able to bypass the ban “as long as their entities linked to WeChat are registered outside US”, said Raymond Wang, managing partner at Beijing law firm Anli Partners, even though whether and how much US companies will be impacted by the Trump ban are still not clear.

“While we are not in a position to judge the future evolvement of this issue, we believe the current EO (executive order) seems to be targeting only WeChat, and if we are correct, the impact to Tencent’s financials would be limited,” Citi analysts wrote in a note Friday.

(Adapted from Reuters.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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