The Chinese government is “buying” shares of Alibaba, Tencent and other technology companies to be more deeply involved in their businesses, sources told the Financial Times.
The stakes typically include 1% in a key segment and are known as “special management shares,” which give Beijing the right to make certain decisions in companies. This allows the Communist Party to gain more influence over the technology sector, especially in terms of the content it provides to Chinese people, the report said.
In the case of e-commerce giant Alibaba, China’s internet regulator got a stake last week when a unit of a state investment fund set up by the Cyberspace Administration of China bought a 1% stake in Alibaba subsidiary Guangzhou Lujiao Information Technology.
The purchase was intended to strengthen control over content on video streaming service Youku and web browser UCWeb, sources told the FT. The subsidiary also named a new board member, who appears to be an official of the regulator.
Meanwhile, details of the Chinese government’s plan to buy shares in Internet giant Tencent are still being discussed, the report said.
But Tencent reportedly wants a state agency from its home province of Shenzhen to buy the stake, rather than a Beijing-based fund that bought shares in the Alibaba unit.
The same fund also acquired 1% of the shares of a division of TikTok’s parent company ByteDance called Beijing ByteDance Technology, gaining the right to the seat of one of its directors. Communist Party official Wu Shugang, who oversaw online comments at China’s internet regulator, has already joined the board of directors.
According to the FT, Wu has a say in matters of business strategy and investment, any merger and profit-sharing plans, and control over content on ByteDance’s media platforms in China.
The purchase of so-called “golden shares” is in stark contrast to the CCP’s previous policy on technology companies, in which officials did not interfere deeply in their operations but used huge fines as punishment. It is worth mentioning at least the company Ant Group of the famous Chinese technology businessman Jack Ma, which paid $34 billion for his criticism of the government. Now Ma practically lost control of Ant Group.
The recent market collapse in China due to strict quarantine restrictions caused by Covid-19, as well as the loss of foreign investors, has prompted the Chinese government to reassess its approach to technology companies.