China fines Tencent, Baidu and Weibo over banned contents in ongoing crackdown

China’s largest online social networks need to hone their balancing skills between engaging users and policing content to avoid the wrath of internet regulators which this week slapped Tencent Holdings, Baidu and Weibo with the maximum fines allowed under new cybersecurity laws, say analysts.

The impact of the penalties were immediate.

Tencent shares dropped as much as 3.8 per cent in Hong Kong on Tuesday, before closing 1.17 per cent down, after the Guangdong cyberspace authority meted out the “highest fine” for failing to supervise its WeChat platform – China’s largest social tool with more than 900 million users, as required by law, according to a statement on the authority’s WeChat account on Monday.

WeChat users censoring content amid China crackdown on social media

The statement came at the same time as the Beijing cyberspace office imposed the “highest fine” on Weibo, China’s version of Twitter, and a “heavy fine” on Baidu Tieba, an online forum service, for allowing their users to post banned contents, including pornographic and ethnic hatred contents.

US-traded shares of Weibo and Baidu subsequently dropped 4.48 per cent and 2.53 per cent respectively on Monday.

The fines came as a result of the first state-level investigation launched in August by China’s top watchdog under the country’s new Cybersecurity Law, which took effect on June 1.

“I don’t see the publishment as terrible hits to the companies’ core business, but the move has brought extra challenges to these platforms – how to strike a good balance between boosting users and supervising information,” said Li Yi, a researcher at the Shanghai Academy of Social Science Internet Research Center.

The authorities did not reveal the fine amounts, but under cybersecurity rules, the maximum fine could be up to 500,000 yuan (US$76,000). Even then, the amount is minuscule compared with the multibillion-dollar revenue of each of the three technology giants.

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But analysts said enhanced scrutiny to ensure compliance with provisions of the law would raise operational cost for the companies, and any increased supervision ahead of the important Communist Party congress in October may also cast a chill over the social networks whose active user bases are the foundation for the monetisation of their online services.

Beijing has been ramping up efforts to police the country’s internet media in the run-up to the once-in-five-year congress on October 18 that is expected to further consolidate President Xi Jinping’s authority.

This week, the mainland has completely blocked out the use of WhatsApp, a messaging app owned by Facebook, in the country.

“China’s technology companies such as Tencent, Baidu and Weibo are vulnerable to such policies,” said Victor Au, the chief operating officer at Hong Kong-based Delta Asia Securities.

“The punishments will push these platforms to further intensify censorship to block harmful information especially before the Party congress next month,” he said, adding the supervision might loosen after the congress.