Daily Brief: China Is Starting To Regret Having Been So Hard On The Tech Giants Last Year

Daily Brief: China Is Starting To Regret Having Been So Hard On The Tech Giants Last Year

almost 2 years ago3 mins

Chinese gaming giant Tencent reported its slowest quarterly revenue growth on record on Wednesday.

What does this mean?

Tencent is a bit of an outlier among Chinese tech companies, having escaped the government’s otherwise unforgiving attack on the sector. But it was still burned by the fallout: the company’s online advertising revenue fell 18% last quarter from the same time last year, as companies that were directly affected – like online tutors and insurers – wound back their ad spending. TikTok-owner ByteDance didn’t help either, poaching plenty of its would-be advertisers for itself. To add insult to injury, growth in Tencent’s gaming division practically stalled, as the company waits for regulators to approve new game releases. That led the company’s overall revenue to grow by just 0.1% – the smallest uptick since it listed on the stock market 18 years ago.

Tencent revenue

Why should I care?

For markets: The tortoise and the hare.

Tencent is still China’s most valuable company, but its market value has more than halved from around $930 billion in February 2021 to around $450 billion today. That’s a pretty pronounced turnaround, given that for years it was one of the fastest-growing companies in the world. Things are so bad, in fact, that it’s now growing slower than even utilities companies: the top ten firms in this notoriously lethargic sector grew 8.6% a quarter on average last year.

Tencent value

The bigger picture: Look who’s come crawling back.

The Chinese government said this week that it would now be going out of its way to support its tech companies, which helped an index tracking some of the country’s biggest to rally this week. As for why it’s chosen now – the precise moment its economy has started to flag – to cozy up to the biggest driver of its economic growth in the past decade, it’s a mystery.

Keep reading for our next story...

UK Inflation Hit A 40-Year High In April

UK image

Data out on Wednesday showed that inflation in the UK is now the highest of all the G7 countries.

What does this mean?

The prices of goods and services in the UK climbed 9% last month versus the same time last year – well up on March’s 7%, and the fastest rise since 1982. Around 2% of that uptick was down to higher energy prices, but there were rapid rises across the board: food and drink was up around 7%, furniture and household equipment up 11%, and the cost of recreation and culture up 6% – the biggest increase since 2006. That means that the UK’s inflation rate is now higher than that of America, Germany, and the rest of the Group of Seven, and only just shy of a handful of other places.

UK inflation

Why should I care?

The bigger picture: Mo’ money, mo’ problems.

While the most recent US update suggested its inflation might’ve peaked, that doesn’t seem to be the case for Britain. Data out this week also showed that UK unemployment fell to its lowest in nearly 50 years last quarter, and that job vacancies outnumbered those looking for work for the first time on record. That’s got some economists worried that the country could slip into a so-called “wage price spiral”, in which companies raise prices even more as workers demand higher salaries.

UK unemployment

Zooming out: This doesn’t seem fair.

Bloomberg Economics has worked out that inflation will add around £2,400 ($3,000) to the bills of the average UK household this year. But analysis from the Institute for Fiscal Studies (IFS) has shown that the billionaires will be hit the hardest. Just kidding: it’ll be the poorest members of society impacted most, since they spend a higher proportion of their incomes on food and energy – both of which are most to blame for the rising prices. In fact, according to the IFS, inflation for the poorest 10% of households was actually 10.9% last month, compared to 7.9% for the richest 10%.

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