Tencent investing in technology advancements

Print

Email

WeChat Pay operator Tencent announced an investment of CNY500B (US$70B) in May 2020 for technological advancements over the next five years. The amount will be utilized in developing new infrastructure built on emerging technologies including artificial intelligence (AI), blockchain, cloud computing and cybersecurity. Though Tencent’s cloud business was impacted due to the COVID-19 outbreak, the cloud market is expected to see greater adoption from offline industries and public sectors in the long term.

The investments are driven by the Chinese governments push towards structural upgrade of the economy with new infrastructure based on advanced technologies. The government is increasingly encouraging investment projects relating to blockchain that can catalyze the new tech-driven infrastructure. Tencent’s technology investments are also aimed at further bolstering the development of blockchain technology in China.

Mobile payments are an integral part of the Chinese payment system with two dominant players, Alipay and WeChat Pay, having a market share of 92% of the mobile payment transactions in China. China’s central bank is developing a digital currency, a stablecoin and mobile payment system called Digital Currency Electronic Payment (DCEP), aimed at curbing the dominance of the two players in the Chinese market.

Tencent’s WeChat Pay is expected to face stiff competition with the eventual launch of the new digital currency. According to the central bank, the digital currency will be used as a substitute for cash and will incur no charges or fees on merchants or consumers for its use. Mobile payment platforms like WeChat pay usually charge a service fee from the merchants. The launch of DCEP will offer the convenience of cashless payments system with no additional cost for merchants leading higher adoption of the new currency.