Last Thursday (08/06), The President of the United States, Donald Trump, declared a bold ultimatum on two Chinese social media giants, TikTok and WeChat, going with the plan to ban their usage in America. To begin with, WeChat is a billion-user app primarily used by Chinese-speaking populations across the world. It functions as a go-to app for messaging, shopping, gaming, and even dating. The app's strong foundation thrives due to miniscule counterparts as its competitors (like WhatsApp) are banned in China by government mandate. Meanwhile, TikTok, ByteDance's golden boy, is rising exponentially and is continuously gaining popularity worldwide. Their catchy, short, and entertaining videos has successfully caught 800 million global users. However, the POTUS claimed that WeChat and TikTok both threaten the nation's security as they are "puppet tools made by the Chinese Communist Party to gain and track necessary information". Tencent and ByteDance, as the owner of WeChat and TikTok respectively, are obliged to sell their app to US companies by mid-September to prevent the ban.
Donald Trump's WeChat ban is threatening one of the more eye-catching stock rallies of 2020. Tencent Holdings Ltd. stock experienced a sharp decline at Monday's close of 4.8% compared to Friday's closing of 527.5, which puts the stock's two-day loss of market value at $66 billion following America's move to ban residents from using the WeChat application. The company has previously been hailed as a Chinese mega-innovation company in place to dominate global gaming and communications. Furthermore, the Hang Seng Tech Index went down as much as 3.6% and ChiNext Index dropping as much as 2%, fearing further US penalties for other Chinese-based applications. WeChat's ban has the potential to underpin Tencent's $280 billion gain in market value since March 18, 2020. However, the company's representatives has reassured that the social app can withstand a White House campaign that's already entangled dozens of Chinese up-and-comers. A U.S. official clarified the sanction involves only the app and not its owner.
The sale of TikTok’s US operations is expected to reduce potential legal challenges and public backlash if the circumstances still point towards the ban implementation. Microsoft Corp. is the first to discuss matters of acquisition for the US operation of the Chinese-owned video application. A sale to Microsoft, with forecasts predicting the transaction numbering in billions of dollars, would benefit both TikTok, and it’s parent company, Bytedance Ltd. As the public assumed that Bytedance could consider more options to their decision making, one party from the company said that they are being pressured by the White House to sell TikTok’s US operations to an American company. The founder of Microsoft Corp., Bill Gates, also gave his explanation regarding the acquisition of TikTok. He exclaimed that becoming prominent in the social media industry would be a great challenge for Microsoft. No precise value has been reported on how much Microsoft will spend acquiring the late ‘social media sensation, but one report showed that the amount could reach $ 30 billion or equals 440 trillion rupiahs. The new policy by Trump not only raises questions on what motivations lead the President to make such abrupt order, but we can see implications beneath from an impact of such policy, with the possibility of heating up trade conflict between the superpowers of our world.
Sources:
Bloomberg
Wall Street Journal
New York Times
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