Alipay, WeChat Pay, and six other Chinese apps have been deemed a threat to U.S. national security. Now that the executive order has been signed by still-President Donald Trump, American businesses have 45 days to end any transactions with the banned applications.
“The United States must take aggressive action against those who develop or control Chinese connected software applications to protect our national security,” the executive order states.
Alipay and WeChat Pay are China’s two largest mobile wallet apps, the former operated by fintech company Ant Group and the second by tech giant Tencent Holdings (HKEX: 0700). For Ant and its parent Alibaba Group (NYSE: BABA; HKEX: 0700), it’s another blow in a series after a suspended $39 billion IPO and potential forced divestiture at home.
For Tencent, it’s not the first fight against Trump. In September, after the outgoing president attempted to prohibit U.S. businesses any transactions with WeChat (which includes social, shopping, paying, and other services), the U.S. courts sided with the app and temporarily blocked the ban, requesting evidence of its threatening nature. After another hearing in October, the California judge again blocked the Trump administration’s advance against WeChat.
“The record does not support the conclusion that the government has ‘narrowly tailored’ the prohibited transactions to protect its national-security interests,” U.S. Magistrate Judge Laurel Beeler wrote in her decision, as cited by The Verge. She added that the evidence “supports the conclusion that the restrictions ‘burden substantially more speech than is necessary to further the government’s legitimate interests.’”
WeChat counts 1.2 billion users worldwide and prohibiting Americans to do business with the app raises the question, among others, as to how U.S. firms operating in China would be affected.
Now, Trump is going against Tencent again, this time leaving the outcome for Joe Biden to deal with. Biden will be sworn in two weeks, before the ban goes into effect. And it’s no doubt the Chinese companies will again go to court.
New Threats to National Security
Other newly prohibited apps are QQ Wallet and QQ, CamScanner, SHAREit, VMate, and WPS Office.
The first two are also operated by Tencent. Like WeChat, QQ is multipurpose and offers instant messaging, online games, music, shopping, blogging, movies, and voice chat. Its IM is one of China’s older popular apps, though it has lost some of its users to WeChat when the latter launched in 2011. QQ Wallet, a mobile payment addition to QQ, launched more recently, in 2014, in a move seen to intensify competition against Alipay. In 2018, QQ counted 800 million active users, according to the South China Morning Post.
Next up, CamScanner allows image scanning on mobile phones, and this app does have a blemish in its history. In 2019, Russian cybersecurity group Kaspersky Lab found that the app sent malware to Android phones (iPhone was not inspected). The malicious code allegedly gave hackers access to users’ login credentials and could send invasive ads, as BBC reported. CamScanner responded at the time that its new version had the malware removed.
SHAREit, which allows easy transfer of files between gadgets, counted 1.8 billion users worldwide, according to its website. It is operated by Smart Media4U Technology Pte. Ltd., based in Singapore. And this app was outright alleged to be used by foreign intelligence agencies from China to hack into smartphones in late 2017. SHAREit denied its use as a spyware app at the time. Like CamScanner, SHAREit has been banned in India in late June 2020 on similar national security grounds. Its website still lists India among largest user base countries.
VMate is a short-video streaming startup operated by UC Web and backed by Alibaba. As BusinessWorld wrote in a March 2020 report, VMate grew to be India’s “Rural TikTok” before it was also prohibited there on claims of violating user privacy. So, considering Trump attempted to ban the world’s most popular app TikTok (and failed), his move against VMate is no surprise.
WPS Office, developed by Kingsoft (OTC: KSFTF; HKEX: 3888), is a Chinese office suite similar to Microsoft Office for Microsoft Windows and other operating systems. Chinese news medium Shine cited Kingsoft Office officials as saying the prohibition won’t adversely affect the company. It now counts 100 million users overseas, according to the report, and 457 million active users overall. Kingsoft Office is the second most valuable listed company on the high-tech STAR market in Shanghai.
Not surprisingly, China’s response on Wednesday was the all-too-familiar condemnation of the new ban, its foreign ministry issuing another set of statements urging to stop “corporate bullying,” as well as “hegemonic” and “hypocritical” practices.