As in the United States, authorities in China are grappling with domestic (fin) tech companies pushing the boundaries with financial services and acquisitions.
Under magnifying glass
After a major intervention in the ever-expanding Alibaba – for a long time much more than just a web store – it became known today that Internet conglomerate Tencent, among other things, is under the magnifying glass of the Chinese competition authority.
Tencent, known for the widely used Chinese chat app WeChat, was fined a very modest and therefore symbolic fine of more than 64,000 euros for not reporting an investment in the online learning app Yuanfudao in 2018. But more importantly, the company together with search engine companies, among others. Baidu joins the list of tech groups that, after years of freedom, are faced with increasingly strict competition policy.
IPO Ant blocked
Although it is about more than the contrast between government and business, says China expert Frans-Paul van der Putten van Clingendael. “It’s also about the need to regulate a new and fast-growing sector.”
That happened rather roughly with the cancellation of the IPO of Alibaba subsidiary Ant, owner of payment service and lender Alipay. This after owner Jack Ma, who for years had no obstacles in the way, had publicly criticized the government, which he believes would hold back innovation.
Now Tencent is also forced to transfer its financial activities to a separate company, which is then regulated as a traditional bank, insiders report to Bloomberg. Van der Putten: “It will be necessary to find a balance again and again between giving the sector room to develop and, on the other hand, safeguarding stability and control. Because the sector is constantly changing.”
Tencent’s slap on the fingers is also reaching investors. The stock is 4.4 percent lower in Hong Kong. This is also felt on the stock exchange in Amsterdam. And especially with the South African Prosus, the investment company that became world famous for its early interest in Tencent. That was in 2001 and later turned out to be a golden move with many billions of profit.
The price of Prosus today even plunged 6.5 percent into the minus. It is a sign on the wall for investors in these types of tech stocks, says asset manager Corné van Zeijl of Actiam. According to him, investing in China entails a certain extra risk.
Van Zeijl: “The Chinese government will not be fooled and will always keep a finger in the pie. Although the fine for Tencent is of little value, these reports put investors face to face with the facts that their investments are not entirely certain in China. “