China’s Tencent Suspends New Registrations for WeChat
The company attributed the suspensions to a technical update of security features, but fears of new regulatory pressure sent its shares sharply down.
China’s Tencent suspends registrations for WeChat, its popular app.
The Tencent booth at an internet conference in Beijing earlier this month. Tencent’s WeChat service dominates Chinese social media.Credit…Tingshu Wang/Reuters
By Paul Mozur
July 27, 2021, 7:27 a.m. ET
The Chinese internet giant Tencent said Tuesday that it had temporarily suspended new user registrations for its hugely popular WeChat app, raising fears of new regulatory pressures even as it insisted the outage was the result of a technical upgrade.
Tencent said in a statement that the shutdown, which affected only new users and groups registering for the app, would be over by early August and was part of a fix to its security technology.
The timing of the suspension left investors uneasy, with concerns mounting that a regulatory rampage aimed at the technology sector could heavily affect Tencent, China’s largest internet company. By far the company’s most important product, WeChat dominates Chinese social media, allowing users to do everything from share photos and chat to pay for coffee and pay bills.
Tencent’s shares closed down almost 9 percent in trading in Hong Kong. Overall, it was a rough day in Chinese stock markets, with the Hang Seng Index in Hong Kong dropping 4.2 percent and the Shanghai Composite down 2.5 percent, amid concerns over Beijing’s regulatory crackdown.
Thus far, Tencent has managed to steer clear of the worst of a nine-month spree of government scrutiny on China’s high-flying tech sector that has led to multibillion-dollar fines, suspensions of app services and tumbling share prices for its rivals and as well as companies it has invested in. Over the past month alone, Chinese officials have mandated security reviews for internet firms seeking to list their shares abroad and barred tutoring companies, many of which operate online, from making a profit.
Tencent’s worst scrape with Beijing has come through a company it has invested in, the ride-sharing business Didi. Earlier this month, regulators opened an investigation into the company, eventually ordering its apps off mobile stores until the investigation concluded. The company’s shares are now down more than 40 percent from when they listed at the end of last month.
In its statement Tuesday, Tencent sought to play down the suspension, but acknowledged the hand of the government, saying that the security upgrade was “to align with all relevant laws and regulations.”
On Saturday, China’s market regulator separately took action against Tencent, invoking the country’s antimonopoly law. It issued the company a small fine, roughly $75,000, but also forced it to abandon exclusive deals it had with record companies for its music business, arguing that an acquisition had given it excessive market share in the sector. Shares in Tencent Music, which trades in the United States, fell 3 percent on Monday and were down another 4 percent in premarket trading Tuesday.
A trailblazer in chat apps, gaming and social media, Tencent’s soft-spoken founder, Pony Ma, has a track record of keeping the company out of the spotlight and away from government scrutiny.
Yet the company itself is renowned in Chinese tech circles for its aggressive competitive strategies, using its huge social media platforms first built more than a decade ago to overwhelm nascent rivals. Recently, it has taken stakes in a constellation of internet newcomers and then linked its services to them in an effort to compete with Alibaba, a rival e-commerce giant. It’s not clear whether the paltry fine over its music holdings and the quiet security rework are indications it will get off light or the worst is yet to come.
Alibaba shows how bad things could get. In April, Chinese officials fined the company $2.8 billion for monopolistic behavior. Last year, regulators suspended the blockbuster listing of Alibaba’s sister company, Ant Group, days before its initial public offering, likely cutting more than $100 billion from its market share.