Digital Wallets are Next on China’s Financial Hit List

Digital Wallets are Next on China’s Financial Hit List

The People’s Bank of China, which is more of a government goon squad than an actual bank, is making another move to consolidate its financial power in the Far East. The sycophantic shills for Xi Jinping’s isolationist policies already played their role in getting crypto kicked out of China. Now they’re going after digital wallets, specifically WeChat Pay.

The conversation started innocuously last week. Chinese authorities discussed a requirement for Tencent Holdings Ltd (TCEHY), the parent company of WeChat Pay, to form a financial holding company for the payment app, which currently has 1.2 billion monthly active users. That seems harmless enough, unless of course you look at the history of this administration. 

The PBOC is the entity that grants licenses for financial holdings companies, essentially making them the regulatory body for Tencent if this law passes. If you connect the dots, that puts Tencent, the world’s second largest gaming company and an expected player in the development of the Metaverse, under the control of the Chinese government.

Live Game Streaming is Too Democratized for Beijing

Isolating a population of 1.4 billion people is hard work. Eliminating their ability to exchange funds on a social media-based platform seems simple. Control the companies that offer it. China’s move on WeChat comes just one year after they blocked a Tencent merger with Huya (HUYA) that would have made them the largest live-streaming company in the world. 

Live streaming on a gaming network is too democratized for Beijing. It allows for the sharing of free ideas and the mixing of diverse cultures around the globe. That works in America. It’s a challenge to Xi Jinping’s totalitarian rules. Don’t call him an “elected” official. The vote was 2,952 to 1 when he was first elected, and he was declared “president for life” in 2018.

Decentralized finance (crypto) was a threat. Xi Jinping removed it. Social media is a threat. He restricted access to it. Now, it appears global digital wallets and live streaming are threats also. They’re on their way out, with the PBOC leading the charge. Free enterprise, the oil that keeps the wheels of global commerce turning, is no longer a reality in China, if it ever was. 

Put Russian and Chinese Investments in a Pile and Burn Them

I know this is sounding more like a political manifesto than a financial article, but this is sound financial advice. I shouldn’t need to explain at this point why investing in Russian companies is a bad idea. Even those oblivious to the suffering in Ukraine can clearly see their economy is collapsing. As for Chinese companies, let’s look at Tencent and Huya. 

Tencent Holdings ADR (TCEHY), which you can buy on the OTC market in the United States, is down 18.90% since the beginning of the year. They were trading at $99.10 in February 2021. Share prices opened at $47.54 this morning. Microsoft’s (MSFT) acquisition of Activision knocked them down from the top spot in online gaming. Xi Jinping is knocking them out. 

Huya (HUYA) is in even worse shape. After losing 73% of their share value in the past year, they’re on the verge of getting delisted from the New York Stock Exchange. Their share price opened at $5.03 this morning and is already down to $4.77. If you haven’t sold it yet, you might want to get rid of it. Think of it as early tax loss harvesting. 

Global diversification is a good thing for stock portfolios, but the lines are being redrawn by socio-political situations that take precedence over profits. Investors should think about limiting fund flow to nations that oppose freedom and democracy. Believe it or not, those are financial issues. A free-market economy is essential to global economic growth.  

         

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About the Author

Digital Wallets are Next on China’s Financial Hit List

Kevin Flynn

A former financial professional and founder of AdvisorScale Financial Writing, Kevin lives in Leominster, Massachusetts with his wife Evelyn, two cats, and nine wonderful grandchildren.