U.S. operators may lose key link to China clients

wechat

U.S. operators are at risk of losing a key means of communication with clients in China if President Donald Trump follows through on banning Chinese social media site WeChat.

According to U.S. legal adviser to tech firms, Wilson Sonsini Goodrich & Rosati, this would bar U.S. persons, including companies organized or located in the U.S., or non U.S. persons using property to the jurisdiction of the U.S. from carrying out any transaction that is related to WeChat, with Tencent Holdings, or its subsidiaries.

Casino operators use the social messaging site as one of the main ways of communicating with their clients in Mainland China. They are banned from marketing their casino operations in any form in the country, but can promote non-gaming amenities through such widely used social media channels. 

The ban is also likely to affect communications between teams working in China and Macau.

“At a time when the three U.S. casino operators have lost more than US$500 million in Macau in Q2, the decision of the Trump Whitehouse could seriously handicap them further just as travel restrictions to Macau from the Mainland were beginning to ease,” said Professor Sudhir Kale, founder and principal of GamePlan Consulting.

MGM Resorts, Wynn Resorts and Las Vegas Sands would all be subject to the restrictions, while local rivals Galaxy Entertainment, SJM Holdings and Melco Resorts & Entertainment would not.

The rising political tension between the U.S. and China and Trump’s targeting of Chinese tech giants could also spark retaliatory measures, which could be detrimental to the U.S. operators when their licenses to operate in Macau come up for renewal in 2022.

“Choking Chinese social media such as WeChat and TikTok could also invite retaliation from Chinese authorities when it comes the time for renewal of casino concessions in Macau,” Kale said.

Trump declared the ban on Aug. 6th through an executive order, citing privacy and security concerns. However, the scope of the order is currently unclear and the administration is yet to list specific prohibitions, such as whether the popular payment method WeChat Pay will be covered. The ban will go into effect 45 days from the order, unless it is revoked. 

MorningStar Senior Analyst Chelsey Tam notes in a report that as with prior executive actions, Trump is ultimately likely not to take action, or will only limit WeChat to avoid damage to U.S. businesses.

However, she notes that if the ban extends to all Chinese businesses of U.S. companies with Tencent, this would hurt advertising in China by U.S. affiliated firms, the international gaming industry and the international cloud business.