Tencent's ID Plan Should Please Investors, and Xi Jinping

(Bloomberg Gadfly) -- The founder and chairman of China's dominant social media company wants greater integration between the mainland and Hong Kong.

Specifically, Ma Huateng advocates linking Hong Kong, Macau and the southern province of Guangdong -- an area known as the Pearl River Delta. And he's got just the tool to help: Tencent Holdings Ltd.'s WeChat instant messenger and its one billion global users.

It feels almost sacrilegious to describe WeChat as merely an instant messenger, given that it's the most pervasive force in Chinese technology. With just one app the Tencent chairman, who's also known as Pony Ma, has linked a huge swathe of China's communications, payments, social media, shopping, transport, news and games.

With user growth slowing to an estimated 2 percent in the December quarter, WeChat can't rely on booming uptake of social media to keep boosting the top line. But it doesn't need to. Ma's strategy of driving deeper into consumption has helped the company double the amount of revenue it extracts per user in just two years.

It's the kind of breadth and depth that a one-party state keen on keeping tabs on citizens would welcome, as long as it has access to the data. And that's what Ma is offering (not that Beijing didn't already have it).

His suggestion that the government work to link the travel documents of mainland residents, Hong Kongers and Macanese with mobile phones would also help bridge the One Country, Two Systems gap, which is fast fading into history two decades after the former colonies returned to China under a formula designed to preserve their distinct ways of life.

China's second-richest man is one of the few people who could get away with holding a press conference on a Saturday night, but with the annual National People's Congress getting underway, Ma has people he needs to impress. After all, being wealthy isn't enough to keep you out of trouble.

Currying favor with President Xi Jinping is just one goal of this unified ID proposal. It would also have benefits for Tencent's shareholders. WeChat offers different pay systems in Hong Kong and the mainland: Hong Kong users need to link to a bank account across the border with proof of either residency or a permit to travel there. Recently, it also started allowing Hong Kong customers to link an international credit card such as Visa or Mastercard.

China is paranoid about capital flight and cross-border money flows, so linking IDs would aid authorities in keeping tabs on what is now the preferred payments method for a large number of citizens.

It would also help Tencent collate information for its own businesses, which include a scoring system called Tencent Credit that's based on social networks, spending, and even bike rental.

The notion that WeChat is your ID isn't surprising for Chinese users. In fact, Tencent trialing a virtual ID card in Guangzhou, the capital of Guangdong, seems like a natural step. Hong Kongers, though, bristle at increased meddling by China's government in the affairs of a city that's supposed to have a high degree of autonomy. Integrating the two identification systems will have them even more wary, which is why Ma wants to play up the practical aspects such as faster border crossings and easier payments.

If the plan goes ahead -- and it probably will -- Tencent will get greater stickiness for its WeChat system, while China will gain an even more convenient channel for tracking people in both political systems.

Shareholders will love it, and so will Xi.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

To contact the author of this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net.

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