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Chinese web giant Tencent predicts Beijing has more internet regulations coming – and welcomes them

China is ahead of US and Europe on regulation, says company prez

The President of Chinese web giant Tencent has predicted that Beijing has more regulations in store for the nation's internet companies, and welcomed whatever's coming.

During the question-and-answer section of the company's Q2 2021 earnings call, Martin Lau was asked how regulation of internet companies is affecting Tencent strategy and priorities.

Lau responded by saying that he sees internet regulation as a global trend and that China is "a bit ahead in terms of the execution of a more structural regulation framework".

"I think this should be expected because the regulation has been actually quite loose over an industry like the internet, considering its size and importance," he added.

Lau didn't have a bad word to say about Beijing's many recent regulatory interventions, saying they're "very focused on identifying and rectifying industry misbehaviours and also establishing regulations, they emphasize compliance, social responsibility as well as fair and proper behaviour.

"And we should expect in the future, in the near future, more regulations should be coming."

Lau added that he understands China's government wants to ensure that the nation's internet industry can achieve long-term sustainability, and that its recent rash of regulations have that aim rather than punitive intent.

"The government does recognize the importance on the economic side and social side of the internet industry and also the contribution of the industry to global competitiveness," he said. "So that's why it does want to foster a long-term healthy environment.

"I would say our attitude during this wave of regulation is that we want to embrace this new environment fully, and we want to establish ourselves as fully compliant."

Lau did concede that some of China's new regulations will bite Tencent's bottom line – especially the requirement that online tutoring services adopt not-for-profit business models. Such companies were big buyers of Tencent's advertising services, and Lau thinks they'll be less inclined to do so without a profit motive.

But other regulations, like Beijing's crackdown on kids' gaming, will have smaller impacts. Lau said revenue from gamers aged 12 or under represents 0.3 per cent of Tencent's total takings – or $642,000 of the $21.4 billion Tencent earned in Q2, a year-on-year increase of 20 per cent.

Operating profit was $6.4 billion, up 14 per cent. Monthly active users for messaging services Weixin and WeChat reached 1,251,400 as of June 30th, year-on-year growth of 2.8 per cent., a messaging service and portal that Tencent is de-emphasising, lost almost nine per cent of its active monthly users but still has 590 million using it regularly.

The company sees opportunities across its sprawling portfolio of games, entertainment, and financial services.

Tencent is also a B2B tech player with its cloud and SaaS offerings. Execs said Tencent's shift away from IaaS to PaaS and SaaS is moving along nicely, and that its Tencent Meeting offering (a Zoom clone) leads China's market.

Lau also said that Tencent is working to develop value-added services for products like Tencent Docs, its Office 365/Google Workspaces clone, and expects to integrate into offers like its Salesforce/Shopify clone called WeCom. ®

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