Will Americans still be allowed to spend on new ones in 45 days skins and other upgrades in the very popular online games League of Legends and Fortnite? Since the moment President Donald Trump with an unclear executive order banned transactions with the Chinese social network WeChat as of 20 September, that is the question. Because what exactly does the American president prohibit? Since the decree was issued on Thursday, there has been plenty of speculation about this.
Trump’s presidential decree focuses on “the threat posed by WeChat.” The president sees the social platform and the simultaneously banned TikTok app as tools with which American citizens can be spied on and influenced by the Chinese government.
But the decree prohibits not only WeChat’s transactions, but also those of owner Tencent “and any subsidiary of that company”. Lawyers who have their say in American media are not yet sure what those sentences mean exactly. Tencent said in a response that he was still studying what the decree would have “consequences for the group”.
Largest game company in the world
Opposite a journalist from the LA Times the White House allegedly clarified on Thursday evening that the ban only applies to transactions to and from WeChat. But legal experts argue to the same journalist that the decree does indeed create the space to also go after the transactions of other subsidiaries and investments of Tencent.
Also read our comment: Power struggle for TikTok shows Cold War around tech
If that happens, it could have consequences for many game companies. Tencent, which last year had a turnover of 46 billion euros, is said to be the largest game company in the world with 480 games and 800 million players worldwide. The company owns 100 percent of the shares of Riot Games, the developer of League of Legends, and a 40 percent share of Epic Games, the company behind Fortnite. In addition, it has smaller shares in the American Activision Blizzard (maker of Call of Duty and Candy Crush) and the French Ubisoft (Assassin’s Creed). When American gamers make purchases in these games, Tencent benefits as a (major) shareholder.
In addition, Tencent in the United States is investing in forum site Reddit and in Snap, the company behind Snapchat. Will American companies still be allowed to advertise on these forums in 45 days? For example, can the NBA still receive license fees from Tencent for broadcasting American basketball games in China? And will the decree also have consequences for other companies in which Tencent has bought shares, such as Tesla, Universal and Lyft?
Food and insurance
We have to wait for what the US Department of Commerce will do; it has 45 days to work out Trump’s decree. But even if it only remains a ban on transactions to and from the social medium WeChat, the decree could have consequences for American companies.
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WeChat has been referred to as the Chinese equivalent of WhatsApp, but it is not just a chat app. WeChat has a huge role in the Chinese consumer economy as it also functions as a payment app, a food order app, and an app that allows insurance and other services to be taken out.
The British business newspaper Financial Times writes that American brands such as Nike, Walmart and Coca Cola use the app to sell products to more than a billion, mostly Chinese users. The servers on which WeChat runs partly consist of components and software supplied by American computer companies. And banning US companies from cooperating with WeChat in any way could mean that Google and Apple would have to remove WeChat from their app stores.
The FT points out that Apple lost billions in stock market value after the decree. If the Chinese are not allowed to download WeChat, it could have major consequences for the sales of Apple’s iPhone in China.
In any case, the decree has the greatest consequences for Tencent itself. Comparisons are already being drawn with the Chinese technology manufacturer Huawei. After a similar American ban over a year ago, it also lost buyers for its smartphones and 5G technology in many other countries, under pressure from the United States.
Since November Tencent had focused on the expansion of WeChat outside of China, by making payments with Visa, Mastercard and American Express possible. The Tencent share lost 5 percent in value on the Hong Kong stock exchange on Friday, the loss on the American stock exchange, where Tencent can be traded via derivative shares, later rose to minus 7 percent.