In a torrid year for Chinese Big Tech, it has been more or less business as usual for the country’s most valuable tech company, and its founder, now China’s second-richest man.
Tencent, the $730bn social networking and gaming giant, and Pony Ma, its 49-year-old chief executive, have avoided significant public censure at a time when Alibaba, Ant Group and Meituan have faced serious questions from regulators over their businesses and market power.
Tencent is unlikely to escape unscathed, according to officials who are quietly putting together a case against its music business, but Ma’s low profile and close attention to government relations have put the company in a good position during negotiations.
“Keeping quiet will help you make a fortune,” said two Tencent employees, citing a golden rule for China’s entrepreneurs popularised by the former Communist party leader Jiang Zemin.
By contrast, his outspoken former rival, Jack Ma, has barely been seen in public since regulators halted the $37bn initial public offering of Ant Group, his fintech company, last year.
“Pony is what the government wants in a tech executive. He is low profile and generally goes along with government plans,” said one tech start-up founder. “He is the opposite of Jack Ma.”
According to two tech officials in Guangdong province, where Tencent has its headquarters, the group’s music division is likely to be handed a large fine this summer, after the celebrations for the Communist party’s 100th anniversary are concluded.
Regulators are likely to issue a fine for antitrust abuses at Tencent Music, a music streaming service that has about two-thirds of China’s online music market and that was spun off and listed in the US in 2018, the officials said. Tencent declined to comment on the potential fine.
The officials added that Tencent was still negotiating hard behind the scenes over whether it would have to give up some of its exclusive music rights with the world’s largest record labels, or sell music apps.
“Tencent will take a penalty. They have to show their loyalty and make a nice gesture [for Beijing]. It’s all down to Beijing — local authorities don’t have enough power to help,” said one Guangdong official.
But Tencent’s core businesses, video games and the superapp WeChat are not thought to be facing pressure from regulators, despite WeChat having become such an important social media and messaging platform that it is commonly referred to as a “public utility”.
Over the years, Ma has shown a keen ability to sense changes in the climate towards the tech sector.
At China’s annual legislative session this year, Ma, who has been a delegate to the National People’s Congress since 2013, called for tighter regulation of internet businesses, lending high-level support to the current government campaign.
The company handles numerous requests from various branches of government for censorship and surveillance on its messaging platforms.
In January 2020, WeChat censored hundreds of new keywords related to the government handling of Covid. The information it has handed over has led to arrests and punishments — notably of a man who was sentenced to prison for calling President Xi Jinping a “steamed bun”.
To boost its surveillance abilities, Tencent has developed algorithms to better censor images. “The government needs WeChat — they rely on each other,” said one employee.
Tencent has also provided the government with cloud computing services, as part of the push to develop Chinese “smart cities” and its engineers worked on apps to help with the Covid-19 response.
As China’s other tech executives step back from day-to-day management, most notably Zhang Yiming at ByteDance, owner of video platform TikTok, and Colin Huang at Pinduoduo, the ecommerce group, Ma is in his 23rd year at the top of Tencent.
Born to a middle-class family on the southern island of Hainan, he took up writing code at university, quickly becoming a “master of creating computer viruses”, according to an authorised book on Tencent’s history by journalist Wu Xiaobo.
“I’m a typical computer programmer,” Ma told Chinese media. “Even my parents didn’t expect that a nerd like me could start a company.”
By his own account, he is “not very sociable”, nor “good with words”. He seldom gives interviews or speeches, makes public appearances or posts on social media.
But under his leadership, Tencent has grown its revenues 24-fold over the past decade, and has become China’s most active investor, funding 160 start-ups last year. The value of its publicly traded investments alone was Rmb1.4tn ($216bn) at the end of March, more than a quarter of its market capitalisation.
It has taken stakes in Chinese upstarts such as food delivery group Meituan and ecommerce juggernaut Pinduoduo, while buying up shares in up-and-coming tech and gaming companies abroad such as Snap, Riot Games and Epic Games.
Tencent also invested in a venture capital group started by the son of China’s top financial official while taking investment from the group for Tencent Music.
Its prolific dealmaking has also put it at odds with antitrust regulators, who have fined the company several times in recent months for not seeking approval for past acquisitions. Ma said the company was “actively co-operating with the regulatory authorities . . . including sorting out some of these past investments”.
Elsewhere, Ma steered Tencent away from pushing the boundaries of tech and finance. While Jack Ma’s Ant Group grew into China’s largest consumer lender, Tencent tiptoed behind. And months before Ant Group’s IPO was cancelled, Pony Ma submitted his resignation as representative of Tencent’s mobile payments platform Tenpay.
“The core tenets of finance are stability and health. It’s about who lives longer, not who runs faster in the short term,” Pony Ma said during a 2017 legislative session as regulators scrutinised financial risk. Ant now faces a “rectification” campaign set to shrink its business while Tencent is testing a credit card-like consumer loan product.
The company’s biggest public relations challenge to date came four years ago, after parents and the state media started complaining that Tencent’s gaming business was causing addiction in children, a campaign that resulted in the government halting new gaming licences for almost a year.
Within a day of the People’s Daily publishing its first critical op-ed on Tencent’s gaming business, the company announced it would set time limits on children’s use, becoming the first Chinese group to do so, more than two years before a government edict arrived to compel the rest of the sector to follow suit.
Since then, Ma had been “extremely focused and details-oriented” in addressing the issue, and on at least two occasions emailed the child protection team in the early hours of the morning to give advice and encouragement, said a member of the team.
Reporting by Nian Liu, Yuan Yang, Ryan McMorrow and Sun Yu