How Trump’s war against WeChat could revamp the global tech industry

Trump called for a ban on WeChat, a popular messaging app, in the US if it could not find a buyer in 45 days. The administration’s attack on WeChat has created a cloud of uncertainty over its parent company, Tencent, that is escaping its purse strings. The Chinese company is one of the most valuable companies in the world with far-reaching tentacles in the tech and startup ecosystem, including in the US.

It was called a “SoftBank of China”, a reference to the Japanese conglomerate that came into tech as a tech maker with a massive investment fund. Tencent outpaced Tencent SoftBank as the company with the second highest number of investments in private companies with valuations of more than $ 1 billion, behind Sequoia Capital. (SoftBank ranks third.)

According to data from PitchBook, a research firm that tracks private and public capital markets, Tencent has made 53 investments worldwide in 2020 alone compared to SoftBank’s 37 investments. But SoftBank has been more active in the U.S. market: Just three of Tencent’s deals have been in the U.S. this year compared to SoftBank’s 16, according to PitchBook.

“Tencent is perhaps the most powerful investor in China today,” Arun Sundararajan, a professor at New York University’s Stern School of Business, told CNN Business.

By targeting a Tencent property, the Trump administration can “put a serious damper on Tencent’s global expansion ambitions,” Sundararajan said. In addition, the movements of the Trump administration could further incentivize Tencent and its peers from investing in and collaborating with U.S. tech companies.

“The level of uncertainty for investors and established firms in the U.S. markets has been high for some time,” said Harry Broadman, a former U.S. trader. With growth already slowing down due to the pandemic, he said, “this is hardly the time to inject even more uncertainty into the economy.”

The crackdown on WeChat could also raise questions about whether the administration will focus its interest on companies with ties to Tencent, whether through partnerships or investments.

“We are in the process of seeking further clarification,” he added. (A Tencent spokesman told CNN Business in a statement that it was “reviewing the executive order to gain a full understanding.”)

Demers also said that the actions of the administration over the past year are intended to “ensure that we have suppliers from trusted countries – and that is countries that share the same political values ​​- that carry out these telecommunications networks on which we whole lives are already running and will only run more in the future. ‘

Whether the Trump administration remains focused on WeChat or tries Tencent more broadly, its moves could fundamentally change the digital marketplace.

“I do not think we still fully understand that, by hitting on Chinese companies that are coming out because they are trying to penetrate international markets, we are essentially saying to the world, maybe these internet markets are not international , “said Peter Petri, a professor at Brandeis University’s International Business School and a non-resident senior fellow at Brookings.