China and the World

Shooting the messenger

American firms worry about the impact of a proposed ban on WeChat

WeChat-w

US businesses in China need it too

Nearly 14,000 executive orders have been issued since George Washington became the first president of the United States. Some of the more controversial ‘instant laws’ – which require no approval from Congress – have included a ban on hoarding gold during the Great Depression and the internment of Americans of Japanese and German descent during the Second World War.

Much more recent is Donald Trump’s proposed block on “any transaction that is related to WeChat”, Tencent’s all-in-one app. Issued on August 14 in the name of safeguarding national security, and effective within 45 days, the edict applies to Americans and US firms. And it has rattled US business circles, especially those with substantial sales in the Chinese market.

Their concern was immediately apparent in a survey of 142 corporations initiated by the American Chamber of Commerce in Shanghai. An overwhelming 88% of respondents warned against widening the restrictions to usage of WeChat by US firms and citizens in China itself.

Aside from facilitating exchanges with clients and employees as a chat messenger, WeChat is widely deployed as a marketing tool through mini-programs that operate as virtual stores, or a feature called Moments, that resembles Facebook’s newsfeeds. WeChat is even used in regulatory compliance, where firms receive directives from the government or make appointments for their business-licence applications.

Another major challenge that the ban poses is to payments. In a society that has largely leapfrogged credit and debit cards, WeChat provides one of the main ways of processing payments for businesses, commanding 39% of China’s mobile payments market.

If the ban goes into effect, top US brands from Walmart to Estée Lauder will need to figure out how to comply with the directive without inconveniencing their customers – many of whom want to purchase goods with WeChat Pay.

Tech giant Apple could be another of the hardest hit in commercial terms, after 95% of people surveyed by Sina Weibo said they would rather ditch their iPhones than give up WeChat in the event that it has to be removed from Apple’s Chinese app store (the survey polled 1.2 million netizens in China). That could translate to a 30% decline in annual shipments of the iPhone, according to research by TF International Securities.

Walmart is another company that must be worried: last year 30% of its sales transactions in China came from its ‘Scan and Go’ app, a program embedded within WeChat.

“For US companies in China, losing the ability to use the WeChat platform could literally be an existential threat,” warned Ker Gibbs, the president of the American Chamber in Shanghai.

More than a dozen American multinationals voiced their concerns about the ban in a call with White House officials last month. Their lobbying may have had an effect: administration officials are now said to be warming to the idea of a partial ban, allowing US entities to continue doing business with WeChat, Bloomberg reports.

Speculation about a softer stance helped Tencent’s Hong Kong-listed shares to recover much of their lost ground since the announcement of the order against WeChat.

But even if the executive order applies only to use of WeChat on US soil – and hence American firms are allowed to use it in China – the blow to Chinese communities in America could still be palpable, especially for those who depend on the app to stay close to friends and relatives back in China (WeChat has around 19 million daily active users in the United States, according to market research firm Apptopia).

One group of users has already filed a lawsuit with a district court in San Francisco in response, challenging what they collectively regard as an unconstitutional block on their freedom of speech.


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