When I handed cash to the cashier at a restaurant in Shanghai, he looked at me blankly for a moment. In front of the register were prominent signs for WeChat Pay and Alipay, the two dominant forms of mobile payments which are used by hundreds of millions of Chinese instead of cash.
He took my money, and I ate my noodles overlooking the pond in the famous Yu Gardens, feeling uncharacteristically like a yokel.
We’ve pioneered mobile payments in Africa. I’m used to using M-Pesa in Kenya and haven’t walked into a branch since FNB’s smartphone app became my personal banker.
But China is riding a wave of mobile technology that is frankly impressive. WeChat has over a billion users and is the everything app. It goes beyond messaging in a way Facebook Messenger and WhatsApp have been trying to, but haven’t yet succeeded. WeChat allows you pay for just about anything, lets you order a taxi, book then pay for dinner, send your friends money, use a chatbot with your bank and other service providers, post “moments” that are like Instagram Stories or WhatsApp status updates, and more.
Naspers, the South African emerging markets internet group that owns 31% of WeChat holding company Tencent, has seen its own share price surge because of Tencent’s rise and rise.
The Chinese messaging giant – which also makes the 800m-user-strong instant messaging app QQ – has seen a “67,000% return from its 2004 initial public offering through to January [that] trounced that of every other large-cap stock worldwide,” Bloomberg notes.
In precisely the way most South Africans used Mxit and now WhatsApp – because everyone else uses it – so China has embraced WeChat. It’s a phenomenon.
Which is why the current selloff of its share is so remarkable. It has lost US$252bn since January, which Bloomberg calls “by far the biggest wipeout of shareholder wealth worldwide”. From its height of $576.7bn on 23 January, it plummeted to as low as $324.4bn last week.
The main cause is a ban by the Chinese government on approving new mobile games, which are one of Tencent’s other main sources of revenue, accounting for an estimated 40%. The ban was instituted in March and is likely to only be lifted next year.
In August, the government also ordered that the recently released Monster Hunter game could not be sold. China’s overall video games market is estimated to be worth $30bn.
It wasn’t helped by an uncommon first quarter drop in profits. The overall effect has pushed Tencent out of the top 10 most valued listed companies in the world.
Meanwhile, the planned listing of Tencent Music Entertainment in the United States has also been put on hold, because of a general slump in global tech stocks. Tencent was expecting to raise an estimated $2bn from this initial public offering.
The global headwinds and Chinese regulatory crackdown appear to be against Tencent but I suspect it will bounce back once both have been cleared. Numerous commentators have pointed out that, while the current ban is on new games, Tencent has many other established titles that continue to do well.
The sheer volume of WeChat users in China alone – and the lack of a clear rival with as broad a reach – also mean it could recover when the regulatory cloud is eventually lifted.
In the meantime, it’s still the easiest way to pay for lunch – and everything else – in China.
This column first appeared in Financial Mail