Yesterday, we reported that some American companies are coming together to boycott the WeChat ban. The ban on WeChat and TikTok will take full effect next month and many American companies in China are perplexed. A recent report shows that many major US companies, including Apple, have called for the Trump administration to end the ban on WeChat. According to the government, the ban aims to establish a “clean network” that excludes Chinese applications. Apparently, the government is banning WeChat not for any wrongdoing but for “lack of trust”.
WeChat ban is not as simple as its sound
While the TikTok ban is simple and straight forward, WeChat ban has a lot of implications. Presently, WeChat is one of the few viable financial platforms between the U.S. and China. If you take away WeChat, you will technically be “killing” many American businesses in China. Chinese companies in the U.S. have multiple options in terms of payment. However, American companies in China has just WeChat as a viable option. Some may be wondering how the WeChat ban will affect American busines in China. Here is a simple explanation for the situation from one of our commenter “Ricky Spanish”
“For example Wechat handles payments via smartphones so you can buy a burger or a coffee using your phone. Apparently neither cash nor credit cards are popular in China at the moment and everything is smartphone payments now. So American businesses like McDonalds and Starbucks might not be able to take Wechat payments anymore which would be very inconvenient for the customers so they might go to a chinese equivalent of McDonalds or Starbucks and get their burger and coffee. WeChat is also big platform for companies to reach out to potential customers so again McDonalds and Starbucks may not be able to advertise or promote their businesses but a Chinese rival could. So if you can’t take payments and can’t promote your business then financially speaking you are pretty screwed”.
In a recent conference call with the White House, over a dozen American companies kick against the ban. They say that it undermines the competitiveness of US companies in China, the world’s second-largest economy. Participants in the conference call include representatives from Apple, Ford, Goldman Sachs, Intel, Morgan Slidan, Procter & Gamble and other companies.
The U.S. needs to properly explain the executive order on WeChat ban
These companies also seek an explanation for the executive order. They need specific details from the Ministry of Commerce. The business alliance hopes to narrow the scope of the ban. As a communication application with more than 1.2 billion users, WeChat’s status in China is self-evident. Its services cover everything from marketing and communication to e-commerce and payment.
According to reports, this ban may harm Apple’s iPhone sales in the Chinese market. Tianfeng International analyst claims that among hardware products, Apple will be hit the most. At best, Apple’s sales will drop 3-6% and in the worst-case scenario, its sales could drop by 25-30%.