Tencent said that the Trump administration’s executive order banning US companies from dealing with its WeChat app would only affect its international version, arguing that the order’s jurisdiction was limited to the US.
The Chinese social media and gaming group’s share price has fallen by 8 per cent since Washington took aim at the company last week, as investors fret about the impact of the sanctions.
Donald Trump gave US companies 45 days to stop doing business with WeChat. Tencent executives on Wednesday emphasised that WeChat is separate from its Chinese version, Weixin.
“They are two different products: Weixin serves users in the mainland of China, whereas WeChat is a sister product which serves users outside of the mainland of China,” said chief executive Pony Ma on Wednesday.
But unlike TikTok and its Chinese sister app Douyin, WeChat and Weixin are largely indistinguishable aside from their different languages and more limited features for users with non-Chinese phone numbers. Messages and payments flow freely between the two versions and in the past Tencent executives have at times used the names interchangeably.
The company reports a combined Weixin and WeChat monthly user number, which stands at 1.2bn.
“They are likely sending a message to the US government — don’t treat Weixin and WeChat as the same product,” said David Dai of Bernstein Research. “It’s going to help investor confidence.”
The US commerce department has just over a month to interpret and enforce the rules against WeChat. Drawing a distinction between the two versions of the app could allow Apple to continue to offer the Weixin app to its large Chinese user base and permit US firms to advertise on the app in China.
The superapp is a must-have for anyone in China and millions of users abroad use it to stay in touch with relatives and do business with those in mainland China, since Beijing has blocked many foreign-owned communication apps.
James Mitchell, chief strategy officer, also said Mr Trump’s order only covered the US. “Consequently, we don’t see an impact on companies advertising on our platform in China,” he said.
Lawyers say jurisdictional details are likely to remain unclear until the commerce department implements the order. Wendy Wysong at law firm Steptoe & Johnson said that while it is possible Tencent has been advised of this limitation in private discussions with the commerce department, the order itself does not limit its scope to US territory and could have an impact within China.
Mr Mitchell added the US contributes less than two per cent of Tencent’s total revenue.
Meanwhile, Tencent posted strong profit and revenue growth for the second quarter as spending through its mobile payment app returned after the China’s lockdown ended and users continued to flock to its hit video games.
The Shenzhen-based company’s net attributable profit was up 37 per cent from a year earlier to Rmb33.1bn ($4.8bn), while revenue rose 29 per cent year on year to Rmb114.9bn. Analysts had forecast sales of Rmb112.8bn, according to Capital IQ.
Tencent’s shares traded over the counter in the US rose 3.1 per cent.
So far, Tencent’s global gaming ambitions have not been stifled by the US, though restrictions could still escalate as they have for other targeted Chinese firms such as ByteDance and Huawei. The company’s online gaming segment reported 40 per cent sales growth from a year earlier as titles such as Peacekeeper Elite and Honour of Kings kept domestic and international users glued to their smartphones.
Martin Lau, Tencent’s president, said the company had done well in expanding its gaming business globally. “We do have a long-term strategic goal of developing an international presence and we are actually very patient about it,” he said. “We also anticipate that there will be challenges and obstacles.”
Nian Liu and Yuan Yang contributed reporting from Beijing.
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