U.S.-listed China stocks launched into a rallyearlier this week, encouraged in part by indications from Beijing that the witch-huntagainst these companies will soon end. A Bloomberg report, however, suggested that it may be too early to call a truce.<\/p>\n
What Happened: Media and entertainment conglomerate Tencent Holdings ADR(OTC: TCEHY), could soon find itself in the crosshairs of regulators yet again. Chinese authorities are mulling over plans to get Tencent to organize its WeChat Pay as a financial holding company, Bloomberg reported.<\/p>\n
This issimilar to what was askedof Alibaba Group Holding Ltd - ADR(NYSE: BABA) founder Jack Ma's Ant Financial after regulators poured cold water on the fintech company's mammoth initial public offering plans.<\/p>\n
If regulators do decide to go ahead with their proposed plan for Tencent's payment platform, the latter may have to apply for a new license, Bloomberg said. The Chinese conglomerate has to group all its fintech businesses, including banking, securities, insurance and credit rating services under a financial holding company, it added.<\/p>\n
The pushback is that the unit has to comply with strict disclosure and capital adequacy norms that are applicable to traditional banks, the report said.<\/p>\n
Separating WeChat Pay from the WeChat social media platform will introduce uncertainty and reduce the convenience of Tencent's mobile service offerings, Bloomberg said. It also poses risk to Tencent's \"one-stop\" appeal that has helped it to evolve as one of the world's most valuable companies, the report added.<\/p>\n
Related Link: Alibaba Opens Up Walled Garden To Allow Rival Tencent's Payment System In Some Apps <\/p>\n
Why It's Important: China's regulatory clampdown, apparently driven by the quest to bridge the widening chasm between the rich and poor, has weakened most of the high-profile domestic tech companies. The regulations served as speed bumps to check their unhindered growth that, according to the communist regime, was giving them an air of invincibility.<\/p>\n
The tech giants were also taken to task for misusing their dominant position in the market to stifle competition and misuse user data.<\/p>\n
The result of the regulatory crackdown has been apparentand in particular forAlibaba, which has seen its shares plummet from a high of around $319 in October2020 to under $100 last week.<\/p>\n
Renewed clampdowns could only hurt these companies further, which in turn can impact the domestic economy that has taken baby steps toward recovery following the COVID-19 pandemic impact.<\/p>\n
TCEHY Price Action: Tencent shares trading over the counter in the U.S. were up 6.72% to $51.85 Friday afternoon at publication.<\/p>\n
Related Link: How to Buy Tencent Stock<\/p>\n
Photo: Courtesy Tencent<\/p>\n
2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.<\/p>\n
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Chinese Regulators Aren't Done Yet: Authorities Reportedly Seek Overhaul Of Tencent's Payment Platform - - Benzinga<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" U.S.-listed China stocks launched into a rallyearlier this week, encouraged in part by indications from Beijing that the witch-huntagainst these companies will soon end. A Bloomberg report, however, suggested that it may be too early to call a truce Continue reading