- The Chinese government is buying shares in Alibaba, Tencent and other tech companies, according to the Financial Times.
- The stakes usually involve a 1% holding and are known as "special management shares."
- This gives China's Communist Party special rights over certain business decisions, the report said.
NEW LOOK
Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview
Thanks for signing up!
Access your favorite topics in a personalized feed while you're on the go.
Advertisem*nt
The Chinese government is buying shares in Alibaba, Tencent and other tech companies to be more deeply involved in their businesses, sources told the Financial Times.
The stakes usually involve a 1% holding in a key segment and are known as "special management shares," which give Beijing rights over certain decisions at the companies.
That allows the Communist Party to gain greater influence over the tech sector, especially in the content it provides to Chinese people, the report said.
In the case of e-commerce giant Alibaba, China's internet regulator took a stake last week, when an arm under the state investment fund set up by the Cyberspace Administration of China bought a 1% share of Alibaba's Guangzhou Lujiao Information Technology subsidiary.
Advertisem*nt
The purchase was meant to tighten control over content at Alibaba's streaming video unit Youku and web browser UCWeb, sources told the FT. The subsidiary also named a new board member who appears to be an official with the regulator.
Meanwhile, details of the Chinese government's plan to buy shares in internet giant Tencent are still under discussion, the report said.
But Tencent reportedly wants a government agency from its home province of Shenzhen to buy the stake rather than the Beijing-based fund that bought shares of the Alibaba unit.
The same fund also purchased a 1% stake in a unit of TikTok parent ByteDance, called Beijing ByteDance Technology, gaining the right to name one of its directors. Communist Party official Wu Shugang, who oversaw online commentary at China's internet regulator, joined the board.
Advertisem*nt
Wu has a say over business strategy and investments, any merger plans, and profit allocations as well as control over content at ByteDance's media platforms in China, according to the FT.
The purchases of so-called golden shares are a stark contrast to some of the heavy-handed punishments, usually fines, issued by the Chinese government that were previously a trademark of the tight grip Beijing kept on its tech sector.
The recent market rout in China due to stringent Covid-19 lockdowns as well as a loss of foreign investors pushed the Chinese government to re-evaluate its approach toward tech.
As an expert in finance, particularly in global markets and governmental interventions in the tech sector, I can confidently dissect the information provided regarding the Chinese government's recent actions in purchasing shares in prominent tech companies like Alibaba, Tencent, and others.
The article outlines China's strategic move to acquire 1% stakes, termed "special management shares," in various tech firms. These holdings grant the Communist Party specific rights, enabling substantial influence over critical business decisions within these companies. This move by the Chinese government is intended to exert greater control, particularly over the content disseminated to the Chinese populace through these tech platforms.
This initiative signifies a shift in China's regulatory approach, focusing on securing direct involvement within these companies to shape content, influence strategic decisions, and potentially steer merger plans and profit allocations. The aim appears to be tightening control over the information flow and content accessibility on prominent platforms such as Alibaba's streaming service Youku, ByteDance's media platforms, and Tencent's operations.
The specifics mentioned in the article include the purchase of shares in Alibaba's Guangzhou Lujiao Information Technology subsidiary, where China's internet regulator acquired a 1% stake. This move was accompanied by the appointment of a new board member affiliated with the regulator, further solidifying the government's influence.
Furthermore, it's noted that Tencent is engaged in discussions regarding the purchase of government-held stakes, albeit with a preference for an agency from its home province rather than the fund based in Beijing. This showcases a nuanced approach by companies like Tencent in negotiating the terms and entities involved in the government's ownership.
The involvement of Communist Party officials in the decision-making processes of these tech companies, as highlighted by the appointment of Wu Shugang to ByteDance's board, emphasizes the extent of control sought by the Chinese government. Wu's authority extends to strategic decisions, investments, profit allocations, and content control over ByteDance's media platforms within China.
This recent shift in strategy by the Chinese government, moving from issuing fines to direct ownership stakes, reflects the evolving landscape in response to market fluctuations and foreign investor pullouts, notably triggered by stringent Covid-19 lockdowns.
In summary, the actions described in the article underscore the Chinese government's deliberate efforts to secure significant influence and control over the operations and content of major tech companies through strategic share acquisitions, thereby reshaping the dynamics of China's tech industry.
