Global payments and tech has been rocked by the news that President Donald Trump has sanctioned an executive order to ban Chinese apps TikTok and WeChat from being downloaded and accessed through US domains.
The executive order, which was sanctioned by the President who claims it is in the ‘interest of maintaining national security’, states that US technology companies must stop customer interactions with ByteDance and Tencent Holdings, the respective operating companies of TikTok and WeChat within a 45-day period.
US media has reported that the ban forms part of President Trump’s major escalation against Beijing, targeting the encroachment of Chinese tech giants on US markets and consumers.
Spreading panic through Chinese stocks, this morning the Hong Kong Exchange reported that Trump’s order had wiped out a combined $75 billion in Tencent and ByteDance shareholdings.
The Chinese tech giants have both confirmed that they will launch US legal actions to stop Trump’s executive order from being executed.
Tencent and ByteDance maintain that they have fully complied with US business laws and further cooperated with market authorities in expanding their products, services and investments for US business and wider stakeholders.
Earlier this month, US Secretary of State Mike Pompeo stated to the media that the Trump administration wanted to ‘secure clean tech networks for US business’, in a move to curb the ‘growing threat’ of the Chinese government’s influence.
Tech leadership had warned against the US government sanctioning rash orders to restrict TikTok and WeChat in any form, pointing to the firms’ embedded networks within wider tech, entertainment and payment sectors.
Observers have pointed out that the ramifications of Trump’s executive order will go beyond simply banning the popular apps from being downloaded by US citizens.
Tencent, Asia’s biggest mobile technology incumbent, is currently one of the biggest investors in gaming and esports, holding significant investments in leading US game developers Activision Blizzard, Epic Games and Riot Games (the developer of “League of Legends”).
Furthermore, servicing a reported 1 billion customers through its WeChat app which offers its users instant payment services, Tencent is recognised as the biggest active investor in new Fintech and blockchain technologies.
Meanwhile, TikTok is recognised as the world’s fastest-growing app, maintaining a reported 100 million US users. With 62% of its users reported to be under 30, TikTok has been branded as the lead engagement platform for new generation-z consumers, a vital demographic for US advertisers.
Prior to yesterday’s news, tech sources reported that Silicon Valley giant Microsoft had begun negotiations with ByteDance leadership to become a significant investor in TikTok.
Microsoft’s interest in securing a stake in TikTok has been seen as a decisive move by the US technology systems giant to further advance its digital footprint, thereby securing its presence in new developing markets such as India and South America where TikTok is popular.
President Trump’s campaign against Chinese technologies began in 2019, when he sanctioned a two-year ban on Huawei and ZTE which both provide telecom systems and infrastructure for US states and businesses.
Further to market sanctions, the Trump administration has placed geo-political pressure on national governments to follow suit and place restrictions on Chinese technologies – an order that was followed by the UK government this year, banning Huawei from competing for its 5G infrastructure contracts.
Monitoring developments, tech observers noted a turning point in the fractious relationship between the US and China, as the Trump administration continues to expand its Chinese restrictions beyond trade tariffs and restrictions to outright consumer bans.
Markets await to see whether Beijing will retaliate to the executive order, authorising Chinese restrictions on US giants Google, Apple, Amazon and Facebook – knowing that President Trump faces a crucial final three months of campaigning ahead of the US Election on 3 November.
Leadership of financial services, fintech, payments and entertainment have been warned to prepare for further escalations, as geo-political tensions are added to 2020’s never-ending drama.