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Tencent, the Internet giant, under pressure in China - Companies

Tencent, the Internet giant, under pressure in China – Companies

Chinese internet giant Tencent announced a further decline in quarterly revenue on Wednesday, amid regulatory restrictions in China on video games and the technology sector.

After years of explosive growth in one of the most dynamic and connected markets in the world, internet companies in China are now under pressure. Since 2020, the authorities have been particularly picky about issues of competition and personal data. The main players in tech have been pinned down after years of relative laxity, which has destabilized the sector.

Tencent has not been spared: to limit addiction to video games among the youngest, the authorities have imposed since last year on those under 18 a drastic weekly limit of three hours for online games. This measure penalizes Tencent’s very popular multiplayer game “Honor of Kings”. In this context, the world number one in video games recorded a 2% decline in its quarterly turnover, to 140 billion yuan (19 billion euros). Already in the previous quarter, Tencent had recorded the first decline in turnover since 2004.

“Drop in the number of paying players”

Its net profit for the period July-September is up 1% year on year, to 39.94 billion yuan (5.4 billion euros). Progress, however, much softer than last year over the same period when sales jumped 29%. “The difficulties in the sector have led to a drop in the number of paying players” in China, admitted Tencent in a press release. In July 2021, Beijing also froze all new video game authorizations in China, which had weighed heavily on the profitability of the sector. Licensing resumed in April, but Tencent still hasn’t been awarded any major ones.

Sign of the difficulties, the Shenzhen group (southern China) separated from nearly 2,000 employees, according to a comparison of its workforce with the previous quarter. Tencent also announced Wednesday to pay its shareholders a dividend of 19.5 billion euros in the form of Meituan shares, thus drastically reducing its ties with this Chinese champion of meal delivery.

Heading for Europe

Upset in his country, the group is now looking for other outlets, in particular in Europe where the firm is strengthening itself through the acquisition of stakes in emblematic studios. In September, Tencent thus formalized an increase in the capital of the French giant Ubisoft. Tencent is essential in China thanks to its WeChat application (messaging, online payment, social network).

Indispensable in the daily life of hundreds of millions of Chinese, this application is present on almost all phones and also serves as a means of payment, in a country where cash is becoming increasingly scarce.

After years of explosive growth in one of the most dynamic and connected markets in the world, internet companies in China are now under pressure. Since 2020, the authorities have been particularly picky about issues of competition and personal data. The main players in tech have been pinned down after years of relative laxity, which has destabilized the sector. Tencent has not been spared: to limit addiction to video games among the youngest, the authorities have imposed since last year on those under 18 a drastic weekly limit of three hours for online games. This measure penalizes Tencent’s very popular multiplayer game “Honor of Kings”. In this context, the world number one in video games recorded a 2% decline in its quarterly turnover, to 140 billion yuan (19 billion euros). Already in the previous quarter, Tencent had recorded the first decline in its turnover since 2004. Its net profit for the July-September period was up 1% year on year, to 39.94 billion yuan ( €5.4 billion). Progress, however, much softer than last year over the same period when sales jumped 29%. “The difficulties in the sector have led to a drop in the number of paying players” in China, admitted Tencent in a press release. In July 2021, Beijing also froze all new video game authorizations in China, which had weighed heavily on the profitability of the sector. Licensing resumed in April, but Tencent still hasn’t been awarded any major ones. Sign of the difficulties, the Shenzhen group (southern China) separated from nearly 2,000 employees, according to a comparison of its workforce with the previous quarter. Tencent also announced Wednesday to pay its shareholders a dividend of 19.5 billion euros in the form of Meituan shares, thus drastically reducing its ties with this Chinese champion of meal delivery. other outlets, particularly in Europe where the firm is strengthening itself through equity investments in emblematic studios. In September, Tencent thus formalized an increase in the capital of the French giant Ubisoft. Tencent is essential in China thanks to its WeChat application (messaging, online payment, social network). Indispensable in the daily life of hundreds of millions of Chinese, this application is present on almost all phones and is also used as a means of payment, in a country where cash is becoming increasingly scarce.

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