Trump administration’s scrutiny on Tencent may destroy US gaming industry: analyst
Global Times

A couple takes a photo of the headquarters of Chinese tech giant Tencent Holdings. (Photo: Global Times)

The relentless scrutiny from the Trump administration has now moved its focus onto Chinese tech giant Tencent, which may become the "third Huawei" and "second TikTok" following their crackdown and dismembering by the US government, an analyst warned.

On Thursday, the Committee on Foreign Investment in the US (CFIUS) sent letters to ask about US video game companies' involvement with Tencent, which holds significant stakes in Epic Games, Riot Games and other game companies in the US, a report by Bloomberg said.

Trying to understand more about the companies' protocols for securely handling Americans' personal information, the Trump administration looks to scrutinize the world's largest gaming company and China's second largest market value enterprise.

However, if the US tries its old play like it has done with Huawei and TikTok on Tencent, it may bring about a chain reaction to the US video game industry, as Tencent has a majority stake in key US game companies.

It wholly owns Valorant and League of Legends developer, and holds a 40 percent stake in Fortnite maker Epic Games. It also owns a roughly 5 percent of Activision Blizzard.

"Tencent would not step out of line in terms of obtaining game users' data, as the profits in the lucrative video game market are huge. There is no need to take any risks that might lose the market," Liu Dingding, an independent internet analyst in Beijing, told the Global Times on Friday.

According its second-quarter earnings report, Tencent's online game revenue in both domestic and overseas markets soared by 40 percent in the second quarter to 38.288 billion yuan ($5.67 billion).

Following the Trump administration's ultimatum to ByteDance, the owner of social media platform TikTok, to sell the app to a US company, Liu said the motive behind the latest scrutiny toward Tencent to the US government's aim of slowing down China's development pace in the technology sector — an area that had been traditionally dominated by the US.

"Tencent may become the third Huawei and second TikTok," he said.

Media reports on Friday said a potential deal for a TikTok sale had been reached with US software company Oracle, but it is currently awaiting approval from Trump.

The move also comes amid another ban on Tencent over its omnipotent messaging app — WeChat. The latest media reports suggest a US judge in San Francisco is willing to temporarily halt the ban on WeChat following requests by its users. A final decision was not issued by the judge yet as of the press time.

"Imposing limitations on Tencent's WeChat is just the US smoke screen. If the US does start kicking Chinese tech companies out of the US, the first groups to be impacted would be US enterprises and users," Liu noted, adding Trump's crackdown on Tencent would make no impact on its business operations in China, which contributes to the majority of the company's revenue.

"What Tencent may lose is only money from the US if Trump elevates his scrutiny, but to the US, the most impacted groups will be American game developers, partners and a great number of game lovers," Liu said, noting that "it would be a devastating blow to the US gaming industry."