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US President Donald Trump issued an executive order banning social app WeChat from operating in the US from September 20, 2020. On the same day, he issued a similar order against the ByteDance-owned TikTok. Depending how the order is enforced, the impact may be limited to WeChat users who live in or travel to the US. However, the order could also affect the many US businesses in which Tencent has invested or with which it has supply chain links, including technology companies such as Snap, Reddit, and Tesla.

As a consumer app, WeChat is more insulated than TikTok

The US is not the only country that is scrutinizing WeChat: Trump’s executive order references India and Australia as other markets that have either already banned TikTok and WeChat or are investigating potential threats to national security posed by the apps. India has already banned 59 China-based apps, including TikTok and WeChat, stating that the apps are engaged in activities that are “prejudicial to [the] sovereignty and integrity of India,” namely the transmission of user data from India to “locations outside India” (presumably China). India is WeChat’s largest market outside China, according to Omdia, with 121 million mobile monthly active users (MAUs). It’s not clear to what extent a recent border clash between soldiers of the two countries, in which 20 Indian soldiers died, influenced India’s decision to ban the Chinese apps.

President Trump’s executive order does not explicitly spell out how the ban will manifest in the US, but it casts a broad net by saying that it will prohibit “any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings . . . or any subsidiary of that entity.” This wording leaves room for wide interpretation.

At the very least the executive order would mean that WeChat users in the US would not be able to use the app to communicate with their relatives, friends, communities, and service providers in China; to access and share content or play games via the platform; or to make purchases via WeChat Pay with US merchants that support WeChat Pay. If this is the extent of the ban, then the impact on Tencent could be relatively minor, since WeChat’s user base is relatively small outside China. Omdia estimates that there are about 2.1 million WeChat MAUs in the US (see Figure 1), with WeChat’s total MAUs numbering 1.2 billion globally (mostly in China).

Figure 1: WeChat mobile monthly active users, selected markets, 2020

If limited to WeChat, the ban would also impact the use of and revenue from the WeChat Pay digital wallet. WeChat Pay had 800 million MAUs by end-2019—again, mostly in China—with daily transaction volumes exceeding 1 billion in 1Q19. It is already supported in 64 countries across most regions, including the US, allowing Chinese travelers to make purchases in these countries via WeChat. COVID-19-related travel restrictions are having a more significant impact on WeChat Pay right now, but when travel returns to normal, local economies will benefit from the resumption of tourism-related spending, including by Chinese travelers.

As an investor, Tencent is more exposed

If Trump’s executive order is enforced to apply to all companies Tencent has invested in, owns, or does business with, then many more consumers and businesses will be affected. As well as stakes in Snap, Reddit, and Tesla, Tencent has also invested in or owns numerous other businesses, including games companies such as Riot Games (League of Legends), Supercell (Clash of Clans), and Epic Games (Fortnite), and music firms Universal Music Group and Spotify. These companies are either headquartered or have operations in the US. Tencent also has a film production company and distributor, Tencent Pictures, which has developed Hollywood movies such as Terminator: Dark Fate, A Beautiful Day in the Neighborhood, Venom, and Wonder Woman. It is not clear under the executive order whether or the extent to which any of the businesses in which Tencent has invested or owns will be able to continue to conduct business in the US.

In the advanced messaging and communications market, in addition to the direct impact on WeChat, the ban could put a question mark over Tencent’s ownership of its 17.5% stake in Snap. Again, the wording of the executive order makes it unclear whether Tencent would be forced to divest its shareholding in Snap, thus potentially putting Snap in a precarious position. While Snap’s revenues, daily active users, and engagement increased year on year in 2Q20, and its market capitalization is relatively strong at around $32 billion, widening losses in 2Q20 have driven down its share price from a 12-month high of $26.41 on July 8 to $22.01 on August 10. The market could punish Snap further if it were to lose one of its key investors because of the ban. Snap will join the many companies facing uncertainty and an anxious wait in the leadup to September 20.


Further reading

OTT Communications Tracker: 4Q19, CES001-000082 (July 2020)

OTT Messaging Forecast: 2019–24, CES001-000080 (June 2020)

“COVID-19: Messaging apps’ traffic spikes in 2020 as they become a lifeline for the locked down,” CES001-000084 (July 2020)

“TikTok faces a ticking clock on its Microsoft deal as tensions rise between the US and China,” CES001-000086 (August 2020)


Pamela Clark-Dickson, Principal Analyst, Advanced Messaging and Communications

[email protected]

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