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Entrepreneur

How Tencent has weathered a tech crackdown by being invaluable to China’s censors


The Tencent booth at the China International Fair for Trade in Services (CIFTIS) in Beijing on Sept. 6, 2021. Through its popular messaging and social-media app WeChat, Tencent has become perhaps the most influential tech company in China.Ng Han Guan/The Associated Press

In mid-2018, a group of engineers at Tencent, one of China’s largest technology companies, started crunching data to see if they could predict which Communist Party officials would make it onto the all-powerful Politburo standing committee.

While companies such as Microsoft and Google regularly open up their data to political pollsters and the public for similar purposes, doing so in China is hugely sensitive, and the party was furious when it found out. Tencent was ordered to suspend rolling out new apps and updates, and founder Pony Ma largely disappeared from public view for almost a year.

“Tencent’s experiments with data modelling and surveillance had struck a nerve within the highest echelons of the party, because they underscored the power that Tencent possessed,” writes Lulu Chen in Influence Empire: The Story of Tencent and China’s Tech Ambition, a new book about Mr. Ma and Tencent.

A long-time technology reporter for Bloomberg, Ms. Chen recounts how the Politburo incident was a rare misstep for the company, which through its popular messaging and social-media app WeChat has become perhaps the most influential tech company in China.

That it has done so while maintaining a close relationship with the Communist Party has been in large part because the app enables the government to censor and surveil its subjects to a degree previously not possible.

Often called a “super-app,” WeChat incorporates a huge range of services on top of its basic messaging functionality. It can be used to book taxis, order food in restaurants, pay bills, apply for loans and, since 2020, show the coloured QR codes that record an individual’s COVID status.

“WeChat is all encompassing, covering every facet of life in China,” Ms. Chen told The Globe and Mial. “It’s really benefited the government and enabled them to keep tabs in a way they would not be able to do so without an app that is so ingrained in people’s lives.”

Even amid a tech crackdown that has seen billions of dollars wiped off the value of some of China’s biggest companies, and sent Alibaba founder Jack Ma into the political wilderness, Tencent has weathered the storm better than its rivals.

This is both because of how valuable the government sees WeChat in particular, Ms. Chen notes, and the comparative low profile Mr. Ma has maintained compared with many of his more outspoken rivals.

Communist Party control over business is nothing new in China – the Financial Times reported this week that HSBC recently opened a party committee for its Chinese investment arm. But Ms. Chen paints Tencent in her book as a company unusually close to the government, even as it remains nominally private.

When WeChat first emerged on the scene in the early 2010s, it was seen by many observers as a potential threat to the censors, with group chats making private the discussions that had previously been public. The authorities, it was felt, would pay less attention to sensitive discussions on WeChat, given that they couldn’t be shared or reach wide audiences like content on Weibo or other social-media platforms.

As the app grew in popularity, however, the government began to take notice. Soon, people were being prosecuted for what they said in group chats, or even for forwarding things privately to a friend.

With WeChat becoming more and more entwined in people’s lives, the government found it suddenly had a level of insight it had previously only dreamed of, and while many bristled at the censorship and surveillance, they found they could not live without the app.

One of the reasons the Great Firewall – China’s vast censorship and surveillance apparatus – has become so effective is that Beijing has outsourced and privatized a lot of the work of building and running it.

Companies such as Tencent are given broad guidelines about the type of content they must police, which means they often trend on the side of greater censorship for fear of being punished. They’ve also built means of doing so that the stodgy security bureaucracy might never have come up with.

“Private companies have always innovated better because they’re practising very capitalistic models and are placing their capital with greater efficiency,” Ms. Chen said.

The censors have also benefited from the consolidation in the tech sector, which saw Tencent and others snap up many of their competitors, she added. “Instead of playing whack a mole with 10,000 little companies, you have these few giants and it made things easier for the government to give directives.”

The continuing tech crackdown could further shore up Tencent’s dominance, as it “has dampened the startup scene in China, especially for platform companies,” Ms. Chen said. “Tencent used to be paranoid about what’s going to become the next WeChat, what’s going to come along and render them irrelevant, and now because of this slowdown they might have a much longer time on top.”

The crackdown definitely isn’t all good news for Tencent, especially as the app that has come out the most unscathed – WeChat – is also the one it makes the least money from. New limits on gaming in China have decimated one of Tencent’s biggest sectors and forced it to look for overseas markets, and it has also scaled back its investment arm as Beijing continues to aggressively scrutinize acquisitions.

But in an industry where some companies are facing billion-dollar fines, owning an app that may be vital to the Communist Party’s survival could well prove the most important investment of all.

James Griffiths is The Globe and Mail’s Asia Correspondent, based in Hong Kong. He is the author of The Great Firewall of China: How to Build and Control an Alternative Version of the Internet.



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