• Chinese tech giant Tencent, developer of Chinese social media channel WeChat, has taken a 5% stake in Afterpay.
• The backing sent Afterpay’s stock price soaring, jumping almost 24% on Monday.
• Investors are excited at the prospect Tencent’s support could mean a speedy expansion into the lucrative Chinese market.
• Visit Business Insider Australia’s homepage for more stories.

Proving not even a global recession can keep it down, Afterpay stock is again flirting with all-time highs.

The Australian buy now pay later (BNPL) darling finished on Monday nearly 24% higher, with its share price returning to above $36 levels on the news Chinese tech giant Tencent was backing it.

“Tencent’s investment provides us with the opportunity to learn from one of the world’s most successful digital platform businesses,” co-founders Anthony Eisen and Nick Molnar said in a statement to the ASX. “To be able to tap into Tencent’s vast experience and network is valuable, as is the potential to collaborate in areas such as technology, geographic expansion and future payment options on the Afterpay platform.”

Tencent is in a league of its own, being the company behind China’s dominant social media channel WeChat which boasts some 1.2 billion users.

Its decision to take a 5% stake in the Australian company suggests it could become integrated with the WeChat app, essentially making it a go-to payment solution for Chinese consumers. If that were to happen it would be an enormous coup, marking not just an expansion into the lucrative Chinese market but an explosion into it.

Whether or not that comes to pass remains a matter of speculation for now, but it certainly was enough to excite investors. Afterpay’s share price, which a few short weeks ago languished at $8 – but had recovered in the interim – shot higher yet again, despite recessionary fears at home.

If it were to enter China it would put it head to head again with fierce Swedish rival, and Commonwealth Bank-backed, company Klarna. In March Ant Financial, Alibaba affiliate and owner of payment giant AliPay, took a minority stake in Klarna.

The two are already facing off in Australia, the US and the UK and will now presumably draw new battle lines to fight over consumers in the world’s second-biggest economy, including a burgeoning 400 million-plus Chinese middle class.

The decision also comes at a time when the political relationship between Australia and China has never been more strained. In recent weeks there has been a torrid back and forth between the two trading partners, as the Morrison government supports a global investigation into the origin and spread of the coronavirus. It’s a ploy with no fans in the Chinese Communist Party (CCP), with Chinese state media firing back with criticisms of Morrison and suggesting an economic boycott if Australia doesn’t cease and desist.

While their political factions might not be on friendly terms, their businesses appear to be carrying on just fine.

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