Shanghai, China –When staff in Meimei Ding’s Shanghai office heard about the new executive order banning WeChat in the US, “they panicked and said, ‘What are we going to do?’ ‘
A broadly worded executive order issued by US President Donald Trump last Thursday has placed China’s most-used app, WeChat, at the center of a geopolitical storm, and the US-based companies using it to communicate and sell to more than a billion Chinese consumers, in a strategic bond.
While few details have emerged that reveal exactly what a US ban on WeChat is, the ramifications could be dire.
Ding’s staff facilitate business between buyers and fashion brands around the world, including the US. “Personally I have studied this news thoroughly and the way the executive order is worded is so unclear that I don’t know [what to tell them], ”Said Ding, CEO of the fashion showroom and purchasing agency.
WeChat provides US-based companies with an essential communication and trading line for Chinese consumers.
Ding’s confusion is representative of countless other entrepreneurs, business leaders and middle managers involved in the cross-border trade in goods and services between the two largest economies in the world.
While a ban on the short video platform TikTok, owned by Bytedance, was marked well before this executive order, WeChat’s inclusion has taken many by surprise and potentially drawn many more fashion players into the fray.
TikTok has built a significant user base in the US, with over 100 million users, many of them under the age of 25, and has seen fashion and beauty brands such as Fashion Nova and Elf capitalize on the platform’s popularity as a marketing tool. However, WeChat is a completely different beast.
WeChat provides a much wider range of US-based companies with an essential communication and trading line for Chinese consumers and colleagues. It encompasses both B2B and B2C business functions, it is also used for much longer and is therefore much more deeply embedded in the strategies of brands than TikTok.
Beijing-based law firm Anli Partners said US companies using WeChat could survive the ban “as long as their entities linked to WeChat are registered outside the US,” meaning global players with separately incorporated activities in China would see Chinese use of WeChat unaffected by a ban. However, this loophole would not apply to many smaller fashion and beauty brands.
According to the executive order, beginning 45 days after its release on Aug. 6, “any transaction relating to WeChat by any person, or relating to any property subject to the jurisdiction of the United States” will be prohibited. The only clear way the ban would be lifted is if WeChat’s Shenzhen-based owner Tencent takes off and sells the platform’s US operations.
While Trump’s order does not define what is considered a “transaction” within the order, a subsequent clause does specify that “person” includes “any citizen of the United States, a permanent resident alien, an entity organized under the laws of the United States or any jurisdiction within the United States (including foreign affiliates), or any person in the United States ”and“ entity ”is defined as including joint ventures, companies, other organizations, including international organizations.
A broad interpretation of the order could mean that a large number of American fashion, retail and beauty players will materially impact their business as many, including companies like Nike, Walmart, Michael Kors and Trainer, use WeChat for all kinds of “transactions”.
A large number of American fashion, retail and beauty players will see their businesses impact materially.
Not only do they manage a variety of official accounts, mini-programs, e-commerce activities and membership programs through the app’s ecosystem, they also accept WeChat payments for purchases: both in China and increasingly in other parts of the world, too in stores. within the US.
Experts in China say the biggest losers in this scenario are the US brands that have come to rely on WeChat to reach Chinese consumers. They get a lot more out of the app than WeChat from the reduction in their WeChat sales or from the relatively small user base in the US.
“The income that Tencent generated from these mini-apps [that American companies such as] Walmart and Starbucks [operate] is miniscule compared to Tencent’s video game revenues, ”Beijing-based technician Chengdong Li told Reuters.
“The ban would do more harm to Walmart and Starbucks as they rely on Tencent to get traffic.”
For example, in the case of Walmart, which saw 9 percent of its revenue come from China last year, the “scan and go” feature is embedded in WeChat in China. According to Walmart, the service, which allows customers to pay with their smartphones by scanning the barcode on items and skipping it at checkouts, was responsible for more than 30 percent of transactions in China last year.
However, supporters of the US executive say a ban would affect WeChat and China more than experts in China admit. They point to the value of the data collected by WeChat, which is ostensibly at the heart of the executive branch. This is used as a way of explaining the alleged threat that Chinese platforms, known for surveillance and censorship, are seen to the privacy of US citizens and broader national security issues.
The day after announcing the ban, Bloomberg reported the first impact on financial markets as Tencent saw $ 34.6 billion disappear from its market value on Friday and the yuan fell to the lowest level in two weeks.
In addition to immediate commercial concerns, there are also concerns about interruptions in cross-border communications that could result from a ban.
US-based companies operating in China (as well as China-based companies operating in the US) use WeChat as an indispensable internal communication tool connecting teams from different countries as commonly used apps are blocked in China in a western context . It is this, the so-called Great Firewall of China, that has helped to make WeChat the most convenient tool for Chinese workers to use to communicate with teams and colleagues, both nationally and internationally.
However, many continue to hope that the scope of the ban will not be that wide. A narrower interpretation could mean that WeChat is simply being removed from the US version of the Apple and Google app stores, which would mean its impact would be disproportionately felt by Chinese people living in the US.
For Chinese nationals working and studying in the US, who use the app to keep in touch with friends and family in China, the executive branch has made geopolitical tensions very personal and sharply portrayed the deterioration of relations between the two superpowers.
Jane Ji, who uses WeChat daily to stay in touch, recently moved to Washington DC with her American husband. Now she is making contingency plans.
“I talked to my parents about some backup plans, how we can communicate if WeChat doesn’t work within 45 days. If it’s really illegal, there’s not much we can do, ”she said.
The American designers with whom DFO’s Meimei Ding is collaborating take a similarly optimistic attitude about dealing with a potential ban, which comes in a year when so many other challenges have arisen.
“At work, people will find a way. This year has been so difficult in so many ways [so] this is one more obstacle to overcome at this point, ”said Ding. ‘None of me [US-based] designers seem terribly concerned, they are just determined to survive and get on with their work. “
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