Ant Financial was supposed to go IPO in Shanghai and Hong Kong today. According to media reports, this is because its key backer -Jack Ma of Alibaba – gave a speech in Shanghai in October that described Chinese financial regulations as antiquated. This interpretation may or may not be true – and it’s worth bearing in mind that the media has a habit of projecting its own sixth form ideas of how politics works onto leaders in all countries – but the cancellation of the listing is an indisputable fact.
It’s also a fact that foreign investors in China tend to worry about political intervention in their business interests more than investors in many other countries where intervening in businesses’ internal affairs for national interest motives is less well-accepted. How likely is it that this could happen to other large Chinese companies? Tencent, for example?
Tencent was founded in 1998 to market its flagship messaging product, OICQ, which rapidly changed its name to QQ and became the most popular instant messaging system in China. Unlike many tech companies, however, it did not rest upon its laurels. QQ gradually fell out of favour among users, but by that point Tencent had already diversified massively, developing its own products in house and buying stakes in other businesses at home and abroad. Thus when QQ declined its replacement was not a competing social network, but another Tencent product: Wechat. It now owns huge stakes in entertainment and ecommerce companies around the world.
Tencent has been no stranger to controversy: it has been criticized outside China for its censorship of users of its platforms, and inside China for its data protection policies. Is Tencent at risk of falling into the same kind of political difficulties as Ant Financial?
Short answer: possibly, but it seems unlikely for several reasons, the most important of which is that Tencent is an extremely conservative company. It may seem like an odd way to describe a tech unicorn, but in fact Tencent’s growth has largely been evolutionary rather than revolutionary. Its flagship products tend to be based on minor improvements to existing products (indeed, this has won it something of a reputation for plagiarism), and it often prefers to invest in other innovative companies rather than innovate itself. This reflects the leadership: Ma Huateng, the founder, is much quieter and more restrained than Jack Ma, and the management is a more collaborative enterprise altogether. The result is a company that takes few risks and grows by standing on the shoulders of giants: altogether a far safer proposition than any of Jack Ma’s ventures.
Disclaimer: This article is written to provide information for general consumption. Investors should not base their investments solely on this article. Investors should consult a professional advisor to determine investment objectives that are suitable to their own circumstances.
