Tencent profit growth beats expectations as Beijing clarifies common prosperity’ objective

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Tencent Holdings Ltd (HKG:0700) reported net profits for the second quarter to end-June of RMB42.6bn, a rise of 29% on the same period last year.


The profit was above an average Refinitiv estimate drawn from 13 analysts of RMB34.4bn.


The Chinese games and social media giant saw revenue soar 20% to RMB138,3bn, in line with expectations, while sales from mobile games were up by 13%.


The results were announced amid a climate of investor concerns about how Tencent and other companies will be affected by the Chinese government’s regulatory crackdown on the tech industry.


Earlier this month, Tencent announced new restrictions on how long children can play its online games, in reaction to an article on Chinese state-run media that condemned online gaming as “spiritual opium” and “electronic drugs”.


Tencent quickly put out a social media post revealing it was launching the new measures following requests from “relevant authorities” for increased protection of minors in gaming, with the implication that companies needed to better carry out their “societal responsibility”.


In today’s results statement, the company said: “We have sought to pioneer a healthy game playing environment in the game industry. In August 2021, we further tightened our game time and spending limits for minors in China, beyond regulatory requirement.”


On the same day as the results, Chinese President Xi Jinping elaborated on the concept of “common prosperity” that has started to be pushed by Beijing and which analysts attribute to the tech regulatory crackdown.


“Elaborating on the ‘common prosperity’ objective, China has affirmed its effort to rebalance the economy toward labor, tackling social inequality with redistribution, social welfare, taxes and inclusive education,” Morgan Stanley (NYSE:MS) said, pointing out that Xi’s target seems to be to “increase the middle-income group’s share of the economy”.


The shares, having recently hit their lowest level since June last year, were up 0.3% in Hong Kong trading at $436.2.

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