By Jing Yang and Liza Lin
HONG KONG -- The Trump administration is widening its attack
against Chinese internet giants by targeting a social media app,
WeChat, that is used daily by ordinary Chinese but by few
Americans, further dividing the global internet.
Washington has for weeks signaled its disapproval of global
Chinese-owned social media sensation TikTok, citing concerns
Beijing can use it to mine data American citizens. Tencent Holdings
Ltd.'s WeChat, however, vacuums up a fraction of such information
in the U.S, where it has 19 million daily active users, according
to app data provider Apptopia.
Both apps were hit by executive orders from the White House
Thursday that bars people in the U.S. or subject to U.S.
jurisdiction from transactions with the apps' owners. Analysts say
Mr. Trump's move against WeChat is likely to upset Beijing more
than that against TikTok, with studies showing Chinese authorities
are able to censor messages on an app it has long used to push its
propaganda overseas. Most of WeChat's 1.2 billion users are in
China and those overseas rely on it mainly to communicate with
people in the country.
Mr. Trump's vaguely worded orders take effect in 45 days, during
which time Secretary of Commerce Wilbur Ross will define what
constitutes a transaction, leaving companies and users scrambling
to assess how they will be impacted. If the ban is implemented
widely, it could hurt American businesses in China: brands such as
Starbucks Corp. and Walmart Inc., that market their products on
WeChat as well as take payments.
If the full order prevents the listing and distribution of
WeChat and TikTok or advertising through them, the apps will need
to be removed from Apple's App Store and Google Play and won't be
able to advertise U.S. businesses, said Weiheng Chen, head of the
Greater China practice at law firm Wilson Sonsini. "The more
expansive (the) list is, the more impact the ban will have," he
said.
Thursday's order is part of a campaign by U.S. authorities to
purge what they call "untrusted" Chinese apps from U.S. digital
networks, and escalates a tense U.S.-China relationship which has
sunk to its lowest level in decades. Microsoft Corp. is in talks to
buy TikTok's U.S. operations, after U.S. authorities declared the
app to be a national security threat.
The moves also threaten to further bifurcate the internets of
the world's two biggest economies. China's Great Firewall has long
kept out American tech giants such as Google Inc., Facebook and
Twitter.
"It's a big step towards dividing the global internet,"said Ian
Bremmer, president of political consultancy Eurasia Group. "We're
very much now in a technology cold war."
China's Ministry of Foreign Affairs said Beijing strongly
opposes what it called an unreasonable crackdown on Chinese
companies.
TikTok fired back at the Trump administration in a statement
saying the executive order was done "without due process" and
threatening legal action in response. A Tencent spokesperson said
the company was reviewing the order.
China's internet was ablaze Thursday with many users lamenting
the potential impact and discussing possible alternatives to use.
Users in the U.S. are also grappling with the situation.
"My wife and I are freaking out," said Greg Pilarowski, founder
of San Francisco-based law firm Pillar Legal, which specializes in
technology and gaming. Mr. Pilarowski said he and his wife, a
China-born American citizen, use WeChat daily to communicate with
friends, family and clients in China.
"Placing a ban upon a major communications channel that connects
the two countries is a disastrous idea," he said. "If there's a
case that says WeChat is not compliant with local law, let's get it
to comply."
Shares in Tencent, which is also the world's largest video game
company by revenue, plunged as much as 10% in Hong Kong trading on
Friday, closing down 5% down at HK$527.50 ($68).
In a worst-case scenario for Tencent, U.S. companies could be
restricted from supplying chips and other hardware to Tencent's
servers that power WeChat, its Chinese sister app Weixin and other
businesses, should those be classified as transactions, according
to David Dai, senior research analyst at Bernstein C. Sanford.
"If that happens, it would be a Huawei-like situation," said Mr.
Dai, referring to Huawei Technologies Co., the Chinese telecom
giant that has been barred by the U.S. government from buying
American chips and technologies.
One of China's most established internet titans, with a market
value of $650 billion, Tencent has closer public ties with Beijing
and the Communist Party than TikTok's owners. Tencent's chief
executive, Pony Ma, has been a member of China's rubber-stamp
parliament since 2013 and traveled to the U.S. with Chinese leader
Xi Jinping on a bilateral visit five years ago.
Launched in 2011 by Tencent mainly as a messaging app, WeChat
has in the past decade morphed into a super-app that enables
ordinary Chinese to send texts, photos and videos, receive news and
information, buy train tickets and flights and pay for products and
services in stores.
Chinese overseas frequently use WeChat as a news source, with
state media using it to widely disseminate content, said Fu
King-Wa, an associate professor with the University of Hong Kong's
Journalism and Media Studies Center.
WeChat has been singled out by advocacy groups for bending to
Chinese government censorship -- including pictures and messages
that appear to be sent but the receiving party never sees them. As
early as 2016, researchers at the University of Toronto's Citizen
Lab found that the immensely popular app often censored posts
differently, with users registering with a Chinese mobile number
censored more heavily.
More recently, Citizen Lab researchers released a report in May,
finding that text and pictures sent by international users are
being monitored by the company, and used to refine their censorship
system used in Mainland China.
--Raffaele Huang and Stella Yifan Xie contributed to this
article.
Write to Jing Yang at Jing.Yang@wsj.com and Liza Lin at
Liza.Lin@wsj.com
(END) Dow Jones Newswires
August 07, 2020 11:29 ET (15:29 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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