Tencent’s profit growth in Q2 slows amid tightened market regulation
Published: Aug 18, 2021 10:09 PM
Photo: VCG

Photo: VCG

 China's internet conglomerate Tencent's net profit was up by 13 percent year-on-year, the slowest growth rate for several consecutive quarters, which industry insiders said is a possible reflection of the company's development plans for going further, rather than faster.

Tencent released on Wednesday the results for Q2 and H1 of 2021, which show the company's net profit reached 34.03 billion yuan in the second quarter. While they managed to sustain double-digit growth in the period, the increase rate was the lowest in several quarters in a row.

Numerous major businesses of the company saw a double-digit growth. In terms of revenue sources, Tencent's game revenue in the second quarter was 43 billion yuan, up 12 percent year-on-year and its mobile game value-added services reached a revenue of 40.8 billion yuan, up 13 percent. The biggest revenue growth was in Fintech and enterprise services, which were up 40 percent, according to the company's fiscal report.

This came in line with the rising market regulation and public scrutiny on internet companies, including Tencent and Alibaba, over corresponding businesses, raising some speculation over whether the fall has to do with the tightened regulation. 

The State Administration for Market Regulation told 34 platforms on April 13, including Tencent and Alibaba, to abide by the rules, and undertake a comprehensive rectification of their monopolistic acts and tax-related irregularities or violations within one month.

The regulatory impact on Tencent has been modest, industry analysts said, and the company's slow profit growth is mostly driven by the market's demand for change, Liu Dingding, a Beijing-based tech industry analyst, told the Global Times on Wednesday.

The size of the revenues of internet companies like Tencent and Alibaba is already very large and it is unlikely to maintain the previous super-fast growth rate, according to Liu.

"But in terms of incremental growth, they still maintain a double-digit trend which is fairly fast now, especially when the demographic dividend of the Chinese internet is bottoming out and companies need to develop more multi-dimensional businesses and better products for sustainable growth," Liu said.

Previously, Tencent announced that it would ban users under the age of 12 from spending money on its games. This move that was seen as a major setback for the company's profits after a report by the Economic Information Daily, a news outlet affiliated to Xinhua News Agency, asserted that online games are "spiritual opium", and their impact on teenagers' health should not be underestimated.

Tencent's earnings report for Q2 announced on Wednesday showed for the first time that the proportion of primary school students in games turnover accounted for 0.3 percent, indicating a very limited impact over their business.

Supervision by relevant departments and public scrutiny can push them to upgrade and change their existing problems. "In the long run, it will help their development and make them go further, rather than faster," Liu mentioned.

Global Times