Daily Brief: Tencent Might Be Wishing It Had Saved Its Progress Before China’s Crackdowns

Daily Brief: Tencent Might Be Wishing It Had Saved Its Progress Before China’s Crackdowns

almost 2 years ago3 mins

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Tencent reported worse-than-expected quarterly results on Wednesday, as China’s regulators make it nearly impossible for the tech powerhouse to start a new game.

What does this mean?

China’s making life tough for the gaming industry. For one, it’s restricted under-18s to just a few hours of gaming a week, which means less spending on in-game purchases. And for another, studios haven’t been able to get new games off the ground, with regulators having refused to give studios the green light for nearly eight months. That’s taken its toll on Tencent: the League of Legends-owner’s domestic gaming revenue barely grew at all last quarter from the same time the year before.

Tencent’s advertising business has been struggling with crackdowns too, which have pushed companies in a variety of industries to slash their marketing budgets. The company, then, saw its online advertising revenue drop 13% last quarter, meaning its overall revenue rose just 8% – the slowest since it listed on the stock market in 2004.

Tencent stock

Why should I care?

Zooming in: Two-stop shop.

Those crackdowns have played a part in wiping nearly $500 billion off Tencent’s market value since it peaked last year, and worse could be to come: the Chinese government is reportedly thinking about forcing Tencent to spin off WeChat Pay – part of Tencent’s WeChat messaging platform – into a separate financial company. Thing is, a big part of WeChat’s appeal is the fact it’s a one-stop shop, and breaking it up risks pushing its 1 billion-plus users away.

The bigger picture: Tencent eyes the metaverse.

Tencent’s back is up against the wall in China, so it’s branching out elsewhere: the company’s already partnered up with EA to help turn much-loved franchises into mobile formats, and it’s even launched a whole new international gaming publishing division. And if that doesn’t work, maybe this will: Tencent’s been registering trademarks and hiring developers to prepare for business in the metaverse.

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UK Inflation Hit Another 30-Year High, Catching Economists Unawares Yet Again

UK inflation image

Data out on Wednesday showed that UK inflation hit another 30-year high last month, surprising no one but the world’s top economists.

What does this mean?

Given all the talk of global price rises these days, you might’ve guessed that prices of goods and services in the UK would be much higher last month than the same time last year – 6.2% higher, to be precise. You might be able to teach economists a thing or two, then: they’ve now underestimated inflation for eight of the past 10 months. And it’s not like one rogue outlier skewed results: prices were higher for 10 of the 12 tracked categories last month, including a 5.1% rise in food prices, 8.8% in clothing, and 9.2% in furniture and household equipment.

UK inflation

Why should I care?

The bigger picture: The UK has work to do.

Those higher prices are seriously weighing on Brits: a recent survey showed that half of all those polled were cutting back on nice-to-haves like clothes, and a third were cutting back on need-to-haves like food. That might be why the UK government just slashed its forecast for the country’s economic growth this year from 6% to 3.8%. It’s trying to do its bit, mind you: it announced fuel and income tax cuts on Wednesday, and it’s doubled its funding of grants for struggling Brits.

UK inflation categories
Unit: percentage points | Source: Bloomberg, Office for National Statistics

Zooming out: America is such a tease.

Americans are up against it too: US inflation hit 7.9% last month, which might be why the Federal Reserve (the Fed) said this week that it’s preparing to hike interest rates by 0.5% – double the typical 0.25% – at its next meeting. But Goldman Sachs thinks the central bank is playing coy: the investment bank said it’s expecting the Fed to raise rates by 0.5% at its next two meetings.

US inflation
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