U.S. Broadens Attack on Chinese Internet Giants With WeChat Order

WeChat, whose headquarters in Beijing is pictured, has 19 million daily active users in the U.S.

Photo: greg baker/Agence France-Presse/Getty Images

HONG KONG—The Trump administration is widening its attack against Chinese internet giants by targeting a social media app, WeChat, TCEHY -7.37% that is used daily by ordinary Chinese but by few Americans, further cementing a divide in 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 of American citizens. Tencent Holdings Ltd. ’s WeChat, TCEHY -7.37% 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 on Thursday that bars people in the U.S. or subject to U.S. jurisdiction from transactions with the apps’ owners. The orders 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.

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.

Downloading TikTok and WeChat from the Google or Apple app stores in the U.S. could be blocked by President Trump’s executive orders to restrict the Chinese-owned apps. WSJ watches the markets’ reaction to understand what this means for global business. Photo composite: Sharon Shi

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.

“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.”

Many Chinese users of WeChat lamented the potential impact of the U.S. order and discussed possible alternatives.

Photo: Andrew Harrer/Bloomberg News

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 videogame 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.

Still, Ronald Deibert, Citizen Lab’s director, called the executive order excessive, and said it could lead to retaliation and “contribute to the type of fracturing of the internet that we have witnessed in recent years and which authoritarian governments favor.”

“There are very real privacy and security risks to WeChat users,” Mr. Deibert said in an email, “but a wholesale ban on WeChat is extreme, shortsighted, and likely counterproductive.”

Read More

  • Trump Executive Orders Target TikTok, WeChat Apps
  • Trump’s Moves Against China Driven by Security Concerns, Navarro Says
  • U.S. Sanctions China Officials Over Hong Kong
  • WeChat Parent’s Stock Drops
  • Buying TikTok Is One Challenge for Microsoft. Making It Work Is Another
  • Heard on the Street: Another Nail in the Coffin of U.S.-China Links
  • Q&A: WeChat and Trump’s Order
  • TikTok: What You Need to Know

Write to Jing Yang at [email protected] and Liza Lin at [email protected]

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