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Rachel Lu

WeChat War Escalates, Becomes Showdown Between Government and Internet Users

The battle lines are drawn in what is shaping up to be an epic duel between China’s all-powerful state-owned enterprises (SOEs) and its millions of Internet users.

As Tea Leaf Nation previously reported, the Chinese government is contemplating plans to impose fees on Weixin, also known as WeChat, a mobile messaging app with almost 400 million people developed by Tencent, one of its biggest and most innovative Internet companies in China. Most Internet users believe that China’s three state-owned telecom operators are pushing for a fee scheme because their core SMS and voice business are threatened by WeChat.

The head-on clash of interests between China’s state-owned enterprises, which seem to still operate in a cocoon of planned economy, and Tencent is being closely watched. The outcome would be very telling of the state of China’s regulatory and business environment for private enterprises.

It would also be a test of the power of the collective voice from millions of China’s Internet users. According to an online poll conducted by Xinhua Net, 90% of the respondents voted that they will not continue to use WeChat if a fee is imposed.

Tencent has maintained that it wishes to keep WeChat free for its users. However, the Internet giant has so far kept a low profile in the media, clearly trying to avoid the perception that there is open hostility with the telecom operators and their government backers.

While Tencent is reluctant to lead the charge publicly, millions of Chinese Internet users have taken up arms on its behalf by posting messages critical of the telecom operators and the government. The official account of Netease, an Internet portal, posted a summary of user opinions in rather colorful language on Sina Weibo, China’s Twitter:

If the government succeeds in imposing a fee on WeChat, it means that,

1. WeChat is a great product.

2. China is not a country with a market economy, but a country with a mafia economy.

3. Non-state owned enterprises are worth less than a fart.

4. Some relatives of top leadership are probably working for the three state-owned telecom operators.

5. The Chinese dream is just a dream.

6. Ma Huateng [Tencent's boss] would be crazy not to emigrate.

This post was censored after being retweeted more than 35,000 times.

Internet users were quick to jump on any sign that the government is trying to ram this measure down their unwilling throats. When China Central Television (CCTV) ran a segment outlining the fee schemes of messaging apps in Germany and noting that certain Skype calls might carry extra cost, many believe that the government mouthpiece was laying groundworks for introducing the fee on WeChat. (To be fair to CCTV, the segment actually noted that most messaging apps can be downloaded for free in Germany, and do not carry extra fees other than data fees.)

Tencent is likely working behind the scenes to try to reach a compromise with the telecom operators and the government.  One possibility is that the telecom operators would make Tencent pay a fee for taking up system resources, effectively levying a special tax on the company. While this move would shield users, the telecom operators would likely continue to lose users of SMS and voice services. Alternatively, the telecom operators could insist on imposing a fee directly on users, risking the wrath of millions but driving some back to SMS and voice services and possibly to the telecom operators’ own proprietary messaging apps, like Feiliao from China Mobile.

It is worth noting  that Tencent could also stand to gain from a well-designed fee scheme, especially if a fee is imposed on all similar messaging apps, which may allow Tencent to monetize WeChat and consolidate its dominant market position. The only losers in that case, however, are users who currently enjoy WeChat for free.

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Rachel Lu

Rachel Lu is a co-founder of Tea Leaf Nation. Rachel traces her ancestry to Southern China. She spent much of her childhood memorizing Chinese poetry. After long stints in New York, New Haven and Cambridge, she has returned to China to bear witness to its great transformation. She is currently based in China.
  • Jin

    Would this also mean the end of WeChat service for people living overseas?

    • http://www.weibowatcher.com/ WeiboWatcher.com

      I think Facebook is trying to make that happen by their introduction of Home.

      Anyway, if the chinese government imposed a fee only on mainland users, i dare say they’d be seen as unpatriotic!

  • hydrandt

    CCTV has chosen a wrong country to compare, Czech mobile operators have simply solved the problem by pricing the data plans (as well as all the other services) ridiculously high — especially when compared to other EU countries to the west and north. Too bad for China Mobile they have already put normal prices for data plans.