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2020.08.11 16:40 GMT+8

Analysis: What's the logic behind Trump's WeChat ban?

Updated 2020.08.11 16:40 GMT+8
By Cui Hui'ao

Going after Chinese companies is part of U.S. President Donald Trump's playbook, and nobody's off the hook. The latest victim is Tencent, a company that owns WeChat, one of the most popular messaging apps in the world.

What's the logic behind this latest ban? Are we officially in a tech cold war?

First, let's take a look at what's gone down this week.

On August 6, Trump signed two separate executive orders, putting restrictions on leading Chinese apps TikTok and WeChat. 

It states business transactions involving the two will be banned in 45 days. The Trump administration claims the apps are "national security threats" and endanger the privacy of American citizens.

However, Trump has not issued a blanket ban on WeChat. The order targets transactions related to the app: any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the U.S., with Tencent Holdings Ltd. shall be prohibited. 

It still sounds unclear. We don't know how these transactions are defined, exactly. For example, do they include buying a coffee from Starbucks on WeChat?

Read more: Analyst: U.S. WeChat ban could cause a 30% decline in iPhone shipments

WeChat differs from many other messaging apps like Facebook and What's App. Besides chatting, it's also used to pay bills, read news, watch videos, play games and listen to music. In addition, third-party developers like Starbucks, KFC, Amazon and Nike all have their own mini-programs on the platform.

Read more: What is WeChat and what can it do?

If the ban targets payments and other transactions, then obviously these American companies will take a serious hit. And those running advertisements on WeChat will also be affected. It will be an especially huge blow to one American company, Apple.

Political analyst Einar Tangen says when Chinese consumers are not allowed to upgrade WeChat on their phones through the closed system of IOS, people in China will get rid of their iPhones because WeChat is much more important on a daily basis than the platform it's on. 

"If this goes through, Apple's stock will snow-slide because of the percentage of its sales in China, its largest market," said Tangen.

But what about the potential impact on Tencent? WeChat has over 1.2 billion global users, trailing only Facebook, YouTube, WhatsApp and Facebook Messenger. But unlike TikTok, the majority of WeChat's users are in China. 

According to Statista, less than one percent of mobile phone users in the U.S. use WeChat. In contrast, more than 90 percent use Facebook.

In other words, Trump's executive order is not expected to seriously damage Tencent because the company's main business abroad is in video games and cloud services. So why is Trump doing it?

"You have Donald Trump. Everything is focused on the election. The fact that we're talking about this issue rather than the worst economic quarter in American history or the 160,000 people who have died, or the five million people who are infected in the U.S. So, he has to distract from that message," said Einar Tangen.

From ZTE and Huawei to ByteDance and Tencent, the Trump administration has waged a tech cold war on China. Washington wants to project itself as the leader of the free world and paint China as an evil power needing to be countered. This is clear not only from Washington's escalating attacks on Chinese tech firms, but also from the White House's new decoupling mantra and the pressure it's putting on Europe and its allies elsewhere.

If one looks at what Trump is doing, there are two strategies at play. The new cold war starts with decoupling, making sure the American economy is less intertwined with China's. On top of this, Washington is also using all kinds of means to suffocate China's rise in the technological field.

With the presidential election just months away, instead of focusing on domestic issues, China-bashing now sits atop President Trump's agenda. 

From the tech war and sanctions to more warships in the South China Sea, Washington's campaign against Beijing is accelerating across multiple fronts.

It remains to be seen whether China-bashing will actually help Trump win the election in November or not, but it says one thing about his mentality: China is not a partner anymore but a competitor, an enemy, and a ploy to use for personal gain.

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