Tencent (the most powerful company in China) Part five.

 Tencent & CCP relationship, and the story of China silicon city.

 

It’s time to look at Tencent’s complicated relationship with the China government. Before we get into Tencent’s current relationship with the CCP, it’s important to understand how things all began. In 1979, the then-leader of China designated an area called Shenzhen as the first test zone for his new economic plans - this would be the first part of China where capitalist business models were allowed, and this began China’s rapid ascent to becoming a global superpower.

Nowadays, Shenzhen has been dubbed the silicon valley of China, as its home to many of China’s tech giants, including Tencent. But, the China government’s plan was essential to give some China companies a huge amount of freedom as long as they were benefiting the country overall. So when companies like Tencent and Alibaba capitalized on the internet and built massive user bases, China was happy to allow them to build such dominant companies by any means necessary, without any real regulation - as long as they benefited China and the CCP overall. They felt it elevated the image of China and China entrepreneurship by having these hugely successful companies.

 

It also meant that rather than foreign companies succeeding in China, like the big American tech giants, instead, local China companies would dominate, as the government made it mandatory for foreign companies to partner with a local China company. And finally, the CCP knew that if some China companies became huge empires, then they could invest in lots of other companies; both in China and abroad, thus by proxy allowing China to have a lot of influence on the world, and control the narrative they want.

 

So basically for the China government, Tencent was an appealing prospect; having access to so much data was great for government surveillance and censorship and understanding the psyche of its citizens. "Physicians who were on the front lines who were warning about the pandemic even before it had a name had their communication censored." "WeChat routinely blocks accounts for discussing issues like the pandemic or humans right abuse issues." "They went to my father and threaten him, and said if your daughter doesn't stop talking about human rights we're going to persecute your family like in the cultural revolution". "After their accounts are blocked, users say the police come in to question them". "The problem is the app is so crucial for existence in China that users can't even give it up". So China was mostly happy to not interfere and let Tencent continually grow its dominance even if it sometimes used anti-competitive tactics.

 

Of course, the CCP was wary of how much power this gave Tencent, which is why their relationship could be more complex than you might think. They knew it was essential to making sure Tencent were always very closely aligned with the CCP and give them reminders that if Tencent’s stopped being useful to the China government, Tencent’s power could just as easily be taken away.

 

But anyway, let’s talk about what this partnership actually means. Tencent’s stance is that in order to comply with China’s legal and regulatory requirements, it can process and handle private information without requiring user consent in certain situations…those situations being: ‘if the China government wants us to’. The CCP reportedly has a direct line to the desks of Tencent’s product managers and is able to order deletions whenever they want or monitor specific accounts and specific phrases in both public and private posts.

 

One particularly intimidating policy change in 2017 was that group admins on WeChat were made personally liable for whatever was said on group chats they run. Many simply deleted their groups as a result. Tencent also feeds data to China’s social credit scoring system, which can affect what citizens can do. All that information they have like payment history, real-time location, and who you’re associated with - can allow the government to create an incredibly detailed picture of who you are, what you buy, and how you behave - thus allowing the government to give you a score of how trustworthy you are as a citizen.

 

But as Tencent grew larger, it seems the CCP became more demanding - Tencent has to employ hundreds, possibly thousands of their own censors, whose job it is to block anti-government posts. Tencent then began deleting lots more posts and suspending accounts that stepped out of line.

 

There are multiple examples of creators - such as blogger Laura Lian - who had hundreds of thousands of fans reading her work, but after making one comment the CCP didn’t like, her account was deleted without warning, and her income was gone. And thus whilst China citizens clearly enjoy the convenience of WeChat, which admittedly is such a useful app - in the back of people’s minds they are aware that their every move and comment is documented - something which the CCP openly reminds people of. Whatever Tencent can see, the China government can see. And so it’s kind of crazy that over a billion people have opted to sacrifice all aspects of their privacy and free speech for convenience. There’s apparently a joke in China that if you order too much food via WeChat, you might get police tracking you thinking you’re harboring fugitives.

 

A pragmatic businessman. (Pony ma)

 

Now to be fair here, I really do not believe Tencent’s set out to create a government surveillance tool - this wasn’t some evil plan. Tencent was started by some entrepreneurs who wanted to build a business like anyone else - but they managed to create something so popular that the only way the CCP would allow it was if they had some control too. So Tencent didn’t have any real choice but to fall in line.

 

Pony is a pragmatic businessman, and knows he has to keep the government on his side. Hence when a reporter asked him about censorship at a tech conference, Pony seemed to side with the government by saying: “Lots of people think they can speak out and that they can be irresponsible. I think that’s wrong,”

 

Now to be fair we have no idea how Pony really feels, but he knows what would happen if he spoke out against the CCP in any way. And the reality is that China’s laws require all companies to hand over data if requested. In fact, it’s reported that many companies in China have a special office at their headquarters called ‘the internet security police room’ where China's public security forces can intervene in company operations or track certain users. Which brings us back to the question: why isn’t WeChat as popular outside of China? 

 

It’s not like Tencent didn’t try at all - they do have an English version of their app and even ran big marketing campaigns, like this advert with Messi to try and promote WeChat to the world. However, one of the most fundamental reasons for its limited international appeal is clearly because of this surveillance and censorship.

 

Research from Citizen lab found that the China government does monitor and censor confidential information sent via Tencent’s apps even from users outside of china - for example, I saw a story where one person in a private group chat had sent some news about pro-democracy protests in Hong Kong and was confused when nobody else in the group responded. She only later found out nobody else could even see her messages, as her private messages had been censored without her knowing it. Any taboo issues like mentions of Tiananmen Square, or Tibet are censored on Tencent’s apps regardless of if you’re in China or not. So basically, just because you were using a Tencent app outside of China, doesn’t mean that Tencent wouldn’t still have to supply any of your data to the CCP if they requested it - remember Tencent has to stay on China’s good side. And thus many people would have some fear about one company, especially a company with ties to the CCP, having all their info on every aspect of their life. Thus, whilst surveillance and censorship is what allowed Tencent to become dominant in China as it meant the CCP let them grow so big, outside of China that has scared users off.

 

But that’s not the only reason WeChat isn’t as popular outside of China. The second reason is that every country has different requirements. WeChat works so well because it’s perfectly tailored to China. But for the app to be so effective elsewhere, every country would need its own WeChat version with services specifically suited to its country.

 

Thirdly, since China is such a massive market, it made more sense for Tencent to go deep into that market where they already had lots of momentum, rather than diverting resources to start from scratch in other countries. After all, China has a population of over 1.4 billion people, more than 4 times the entire population of the US. But the one downside of doubling down on China was that Tencent didn’t get the first mover advantage in other countries. So if WeChat did want to try and become more popular in the US for example, it would somehow have to compete against so many different established companies who’ve already managed to get their apps engrained in people’s lives.

 

The final reason and battle with TikTok.

 

But the final reason WeChat didn’t work so well abroad is simply that it’ has historically been the case that China tech companies struggle outside of China, just as American companies struggle inside China. However, of course, there has been one very notable exception recently: TikTok. A China app that truly has managed to go global. And this leads us to one of Tencent’s most fascinating battles. In China, once your business reaches a certain size, you normally have to sell to or partner with one of the big 3: Baidu, Alibaba, or Tencent.

 

But Tiktok, and its parent company Bytedance, were the one notable exception. The western social media giants - like Facebook and Google - completely dismissed the threat of TikTok until it was too late. They let TikTok become one of their biggest advertisers, thus letting them steal hundreds of millions of users from their platforms as TikTok ran endless ads on YouTube and Facebook.

 

Only years later would the American tech giants realize short-form content was here to stay and launch their own short video apps to compete. But by that point, TikTok had already become a massive hit through advertising on their platforms. Tencent’s on the other hand, immediately realized TikTok’s threat and carried out their usual playbook move. Tencent assembled a large team to re-create a very similar app to TikTok within WeChat and then ran massive promotions to advertise it. Tencent’s also banned TikTok from advertising on their platforms, and straight up just started blocking links or mentions of TikTok on its platforms like WeChat.

 

It’s interesting because when Elon Musk briefly blocked external links to competitors within Twitter everyone went 'this is dumb', but in China, that’s just part of the game and an example of the anti-competitive tactics that have enabled China’s biggest companies to build such huge businesses. Unfortunately for Tencent though, for once, this tactic didn’t work.

 

TikTok’s biggest strength was its machine learning algorithm which very accurately showed users the content that would keep them on the platform longer. And thus once people were hooked on Tiktok’s algorithm that already knew their preferences, and was perfectly tailored to them, there was little incentive to switch to Tencent’s copycat version and start over with an algorithm that didn’t yet know their preferences so well.

 

So TikTok’s first mover advantage always gave them the edge. Things actually got heated between Tencent’s founder Pony Ma, and Bytedance’s founder Zhang Yiming, because Zhang posted a screenshot of TikTok being the #1 most downloaded app in the world, and underneath criticized Tencent for making an almost clone version of Tiktok and for banning Tiktok within WeChat. Pony felt this public criticism was unfair given this was a common practice in China and bluntly responded ‘your words can be regarded as slander’.

 

The heated public spat captivated China as both CEOs were normally so mild-mannered and reserved. But it was clear no love was lost in this bitter rivalry. However seeing Tiktok succeed globally on such a huge scale - something which Tencent’s own apps like WeChat have never managed to do - was definitely tough for Pony to take.

 

But wait - hold on a second. Remember back in this blog I said Tencent’s had a lot of influence all over the world? Well if their 2 most popular products, QQ and WeChat aren't that popular with people outside of China, why is Tencent considered such a dominant global company, with influence all over the world? To answer that, it’s time for us to look at Tencent’s genius bigger-picture strategy for world domination.

Click here to Read part 6