What’s going on?
Tencent posted mixed results on Wednesday, as the Chinese government forces the emotionally distant tech giant to finally take on its fair share of child care.
What does this mean?
Like Whitney, China believes that children are our future. So in order to teach them well and let them lead the way, the country’s government banned for-profit after-school tutoring last quarter, as well as introduced stricter limits on how long they can play video games – both of which, it argued, were having detrimental effects on kids’ wellbeing.
Tencent knows how they feel: the company – which sells advertising space in its apps and online games – saw its ad revenue grow just 5% compared to the same time last year, as education companies collapsed and kids’ laser-like focus faded. And while its fintech and business services segment – which includes instant messaging app WeChat – posted strong growth, the damage was already done: Tencent’s overall revenue climbed by a weaker-than-expected 13% – the slowest quarterly growth since the company hit the stock market in 2004.
Why should I care?
For markets: China’s still on the agenda.
Most Chinese tech giants’ stocks are listed in the US or Hong Kong, so investors – nervous about government crackdowns on foreign-listed domestic companies – have been steering well clear lately. They’ve not sworn off the country altogether, mind you: data out this week showed international investors were holding around $560 billion worth of Chinese-listed stocks at the end of last quarter – 30% more than the same time last year.
Zooming out: There are bigger fish to fry.
The Chinese government’s mood probably isn’t about to improve: new data has shown that the prices manufacturers pay for materials accelerated by its fastest pace in 26 years last month, as the country continues to be rocked by power and commodity shortages. Those higher costs will probably be passed onto consumers, put a dent in consumer spending, and, ultimately, hamper the country’s economic growth.
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Originally Posted on November 10, 2021 – Time Out
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