China’s tech industry growth loses steam as Tencent’s depressed earnings show impact of economic slowdown, analysts say

The internet giant’s shares fell 7 per cent in Hong Kong on Thursday to lead a broad-based rout of China tech stocks, a day after posting its lacklustre results

The government’s recent signal to support China’s digital economy could help spark an industry turnaround in the second half of this year

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Tencent Holdings’ depressed first-quarter results reflect how shrinking economic activity in China has cast a pall over the country’s internet industry. Photo: Shutterstock

Published: 7:26pm, 19 May 2022Updated: 3:27pm, 20 May 2022

Tencent Holdings’ disappointing first-quarter results, which showed nearly zero revenue growth in the period, portends similar distressing news from its Chinese tech industry peers amid regulatory uncertainty, a slowing economy and lingering Covid-19-related concerns on the mainland, according to analysts.

Shares of the internet giant, which runs the world’s largest video gaming business by revenue and China’s biggest social media platform WeChat, fell 7 per cent in Hong Kong on Thursday to lead a broad-based rout of China tech stocks, a day after the Shenzhen-based firm also reported a 51 per cent decrease in quarterly profit.

That significant profit decline last quarter may be more worrisome than the company’s flat sales growth, according to Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina.

“It raises questions about how tighter regulation and a slowing economy could structurally decrease the earning power of China’s dominant tech platforms,” Norris said.

People walk past Tencent Holdings’ headquarters in Shenzhen, in southern Guangdong province. Internet giant Tencent reported lacklustre first-quarter results on May 18, 2022. Photo: Agence France-Presse

The disconcerting quarterly performance of Tencent, China’s most valuable tech company, showed how shrinking economic activity has cast a pall over the whole internet industry.

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