TOKYO / SHANGHAI – Chinese internet power firm Tencent Holdings acquires Alibaba Group Maintains start-up investments in 2020, trying out more than $ 12 billion to buy shares in 163 businesses across a wide range of industries.
Tencent has become the largest consumer of start-up ranks among Chinese non-financial companies under an aggressive, yet carefully designed growth strategy that was driven by widespread partnerships on the global market. consolidation by capital ties. But Beijing’s moves to step up efforts to monitor and control their large technical groups could test the viability of the strategy.
When Kuaishou, a Chinese video app, unveiled its first stock market in Hong Kong in February, investment funds both at home and abroad said Tencent was the biggest winner in the process.
Since 2017, Tencent had several times bought Kuaishou shares, reaching a total investment of around $ 2.8 billion. As Kuaishou stock rose on its first public offering, Tencent accounted for more than $ 18.4 billion in paper profits.
Kuaishou is widely regarded as the main competitor to ByteDance, the Chinese company that owns the short video app TikTok. The successful IPO has brought market capitalization to more than HK $ 1.2 trillion ($ 154 billion), bringing a huge windfall to Tencent.
In addition to its own video app, Kuaishou also offers videos through WeChat, the multi-purpose messaging, social media and mobile payment app developed by Tencent and used by 1.2 billion people.
Both Tencent and Kuaishou have expanded their customer base and services through their partnership. This is a normal case of Tencent’s strategy working well.
Tencent began major efforts to invest in start-up rates in the late 2000s and, by the end of February 2020, had gained interest in some 880 companies, according to Beijing Suiyue Juzi Technology (ITjuzi), a research group Chinese.
In 2020, it poured capital into 163 companies, up 40% from 2019, for a total investment of more than 1.3 trillion yen ($ 12 billion) except for cases where the amount was not disclosed.
Tencent’s investment portfolio includes many of the leading companies that provide services through smartphone apps. (Photo by Tomoko Wakasugi)
Tencent’s investment strategy has been strong in the entertainment and game industries, with commitments in 183 and 142 companies in those two sectors, respectively.
The internet behemoth, which earns the largest share of its profits from the game industry, has been reaping great benefits from collaborations generated by its capital and business connections with suppliers. play, music and video services. It has also invested in overseas companies including PlatinumGames, an Osaka-based game developer.
Unlike Alibaba’s domestic competitor, which often tries to take control of companies it invests in, Tencent prefers to remain a minority shareholder and avoid getting involved in just in the management of the companies in which it invests.
Companies that partner with Tencent include Pinduoduo, an interactive e-commerce platform, Meituan, a leading food delivery service, and Sea with Singapore headquarters, which operate online, e-commerce and digital financial services, have gone public.
Tencent’s investment portfolio also includes a bevy of unicorns, or private companies valued at over $ 1 billion, such as WeDoctor, the world’s leading medical health technology platform.
Tencent’s pledges in record-breaking start-ups brought its subsidiaries to 890.7 billion Yuan ($ 137 billion) at the end of September 2020, posting a 12-fold jump in five years, according to the company’s financial statements.
However, his investment campaign is going against political leaders as a result of Chinese President Xi Jinping’s campaign to tighten control over big tech companies.
Chinese regulators announced last Friday that 12 companies including Tencent have been fined for making property without notifying authorities, saying the moves violate rules. the face of monopoly. According to regulators, Tencent failed to inform them about their 2018 build of Yuanfudao, an online learning platform.
Tencent CEO Ma Huateng recently pledged his loyalty to the Xi administration by calling for tighter regulation of the internet economy at a Chinese parliamentary meeting in Beijing.
Ma made the recommendation at the National People’s Congress, which began on March 11, urging the government to strengthen control over some platform providers to ensure consumer safety.
Tencent offers online financial services including a mobile retail banking unit aimed at consumers and small businesses. They are similar in nature to those provided by Ant Group, the Alibaba-backed fintech group, which has been forced to delay their registered IPO.
In December, Tencent and Alibaba subsidiaries were criticized by China’s trust regulators for anticompetitive practices. Tencent will be at greater risk for government intervention if it draws regulators ’attention to potential anomalies in licensing and business scope.
So far, the company has been able to reap the benefits of their relatively small commitments in companies due to the popularity of WeChat, which is a messaging and payment app.
But Tencent’s employment and growth valuation has helped to keep out some regulatory issues arising from the fact that companies to which it has invested have quietly adhered to the rally’s desire. tech despite their small promises. The company has a clear interest in doing all it can to avoid strict regulatory scrutiny of its investments and operations.
Additional statement by Yusuke Hinata in Guangzhou, China.