Chinese Tencent Holdings, one of the world leaders in the games industry, said on Wednesday (18) that the country’s internet companies should prepare for more regulations and uncertainties. Speaking on a conference call for analysts, company president Martin Lau said regulators will “identify and rectify industry behaviors.”
Despite surpassing market expectations, with a remarkable 29% profit in the second quarter of 2021, the owner of Riot Games (read League of Legends) is among the companies that were impacted by the package of regulatory actions triggered by authorities against the country’s technology industries.
While Beijing has long been encouraging the globalization of its companies through capitalization in the US, it appears that the Chinese government is now fearing that critical data accumulated by its big techs could leak abroad. Recognizing that industry oversight has been “lax,” Lau says Tencent is comfortable “to fully embrace this new environment.”
Tencent’s Frustrations and Profit
The “war” of Chinese regulatory agencies prevented Tencent from completing a $5.3 billion deal aimed at merging China’s two largest game streaming platforms, Huya and DouYu International. Blocked by the country’s regulatory authority, the deal would create an online giant with more than 300 million users and a market value of $10 billion.
After an article published in Chinese state media described online gaming as “spiritual opium”, Tencent’s shares have fallen 8% since the beginning of the month, enough for the company to lose its position as Asia’s most valuable company to Taiwanese chip maker TSMC.
Despite the current turmoil, the result for the quarter ended in June was promising for the Chinese giant. The company ended the period with a net profit of 42.6 billion yuan (35.5 billion reais), well above the Refinitiv consensus estimate of 34.4 billion yuan.