Dividends and How Tencent weathered a crackdown by being useful to China’s censors

When a company is successful and that is the goal, at some level it is supported and sometimes does the work of the government in the country it is located in. If you look back into the history book’s company’s such as the East India Company had the support of the British Navy it is dealings with China (the East India company evolved from trading India raw materials with British manufactured goods to importing opium into China for Chinese silver). In more recent times the United Fruit Company which was headquartered in Boston through the US government agencies changed governments in the tropics to ensure its bananas were grown and transported to the US. There are many more examples, when a company sells outside its borders it works with the Embassies are the world to help sell goods and services. In recent times, the examples are Chinese companies doing the work of the Chinese government.

In an article by James Griffiths of the Globe and Mail, in 2018 a group of engineers at Tencent, one of China’s largest technology companies, started crunching data to see if they could predict which Communist officials would make it to the all powerful Politburo standing committee. In the western world, many companies do something similar, in China officials were not amused and Tencent was ordered to suspend rolling out apps and updates and the founder of the company disappeared from public view for a year

There is a new book about Chinese technology companies by Lulu Chen titled Influence Empire: The Story of Tencent and China’s Tech Ambition.

The above was a rare misstep for Tencent which has the most popular app in China WeChat. It is the most popular app because besides the messaging aspect, people can book taxis, order food in restaurants, pay bills, apply for loans and Chinese government regulations.

Tencent has been able to weather the storm of tech company crackdown by the Chinese government because the Chinese government sees how WeChat is valuable and the President of Tencent keep a low profile.

The government saw how important WeChat was to the average citizen, and found a level of insight into people’s lives that could be monitored and they do. Practically, the Chinese government has outsourced and privatized a lot of the work of building and running the monitoring of its people.

The author Ms.Chen believes private companies have always innovated better because they are practicing capitalism models and placing their capital with greater efficiency.

WeChat has benefited from scale and the government has encouraged Tencent to consolidated with many companies. However not everything is good from Tencent’s point of view. The company used to have a profitable gaming site but gambling has been heavily regulated which decreased revenues.

Linking to dividend paying stocks, every successful company deals with government officials sometimes even though they are only interested in selling goods and services, will do what the government wishes them to do. Generally the relationship is a good one, but policies at governments change and relationships are maintained. All companies are bias one way or another, although for shareholders there is a bias towards being profitable and paying dividends.

There are more questions than answers, till the next time – to raising questions.


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