Tencent steps up expansion in healthcare with new US$41.5 million investment in Xunjie Medical as Beijing eases restrictions

The internet giant’s latest healthcare investment would give it a 19.5 per cent stake in Xunjie Medical, which owns German first aid gear maker Metrax
That capital outlay comes months after Beijing pledged to approve more technology deals to help prop up China’s slowing economy

Tencent

Iris Dengin Shenzhen

Published: 7:00pm, 20 Sep 2022

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Tencent Holdings plans to invest 291 million yuan (US$41.5 million) in a subsidiary of Jiangsu Yuyue Medical Equipment & Supply Co, which would expand the Chinese internet giant’s portfolio in the healthcare sector months after Beijing pledged to approve more technology deals.

Once completed, that investment would give Tencent a 19.5 per cent stake in Jiangsu Xunjie Medical Technology Co, according to a filing by Yuyue Medical on the Shenzhen Stock Exchange late on Monday. Xunjie Medical controls German firm Metrax, a maker of defibrillators and other first aid medical equipment under the Primedic brand.

The investment will be used in research and development, as well as for daily operations of Yuyue Medical, according to the filing.

Tencent on Tuesday declined to comment. Its shares were up 1.52 per cent to HK$293.40 at the close of trading in Hong Kong.

Primedic-brand defibrillators from first aid medical equipment maker Metrax, a German firm controlled by Jiangsu Xunjie Medical Technology Co. Photo: Handout

Before the Tencent deal, healthcare equipment maker Yuyue Medical, headquartered in eastern Jiangsu province and the sole listed firm of Shanghai-based Yuwell Group, had been known for an internet health insurance-related business with Alibaba Group Holding, owner of the South China Morning Post.

Yuyue Medical was also initially involved in a plan that would have raised its stake in Chongqing Ant Consumer Finance, which is 50 per cent-owned by Chinese financial technology unicorn Ant Group, before that capital raising exercise was scrapped in January this year. Ant Group is an affiliate of Alibaba.

The latest investment by Tencent, which runs the world’s biggest video gaming business by revenue and China’s largest social media operation through super app WeChat, would augur well for the Shenzhen-based company’s continued strategic business expansion initiatives.

With a tech empire that touches the digital lives of nearly all of China’s more than 1 billion internet users, Tencent is known for actively investing in a wide variety of companies. Its 2021 holdings amounted to US$130 billion, 27 per cent higher than the year before, according to the company’s latest annual report.

China’s Big Tech firms scale back strategic investments amid Beijing’s scrutiny

That pace of investment activity, however, has significantly slowed down because of Beijing’s regulatory crackdown on the internet industry, with a focus on Big Tech companies.

Under the government’s crackdown, Chinese antitrust regulator the State Administration for Market Regulation slapped multiple fines on Tencent and other major tech companies for failing to report past mergers and acquisitions for review.

China’s leadership, however, has pledged to be less restrictive on the activities of the Big Tech firms after imposing tightened scrutiny since late 2020. A Politburo meeting chaired by President Xi Jinping in late July concluded that more investment deals in the tech sector should be given the green light, as part of efforts to prop up the country’s slowing economy.

Tencent, ByteDance dominate global app revenues despite headwinds at home

In the first half of this year, Tencent made just 32 investments and acquisitions, which accounted for about a quarter of its 129 total transactions in the same period in 2021. The firm also downsized its investment department, while reducing its shareholding in some major portfolio companies such as JD.com and Singapore-based tech firm Sea.

This year, Tencent has already managed to make a number of investments in the healthcare sector. Some of its recent deals included a Beijing-based drug discovery firm Singlomics and nursing home company Fortune Care in Shanghai, according to data from online business registry service Tianyancha.

The latest Tencent deal comes weeks after TikTok owner ByteDance made one of its biggest investments in China’s healthcare sector. Tech unicorn ByteDance in August acquired Beijing Amcare Medical Management Co, operator of the country’s largest private hospital chain specialising in obstetrics and gynaecology.