This move signals a change in Beijing’s priorities as it seeks to expand its influence and regulate the tech industry
China is set to acquire “golden shares” in Alibaba and Tencent, two of its major tech companies, as part of its efforts to increase its influence over the country’s leading tech firms and wealthiest entrepreneurs. This marks a change in strategy from Beijing’s previous approach of imposing large fines and sanctions during its two-year tech crackdown, which was initiated following critical remarks made by Jack Ma, the founder of Alibaba, about regulators.
Chinese tech firms have been significantly impacted by the government’s crackdown, resulting in billions being wiped off their value. For instance, the IPO of Ant Group, which would have been the world’s largest, was blocked.
Earlier this week, Ant Group announced that Jack Ma, once China’s richest man but now living in self-imposed exile in Japan, would relinquish control of the company. However, the Chinese government’s strict approach has led to weakened foreign investment and competitiveness in the country’s tech market, resulting in a shift in tactics to keep its big tech firms in check. As part of this approach, Beijing has recently taken a small equity stake in Weibo, a Twitter-like platform, and ByteDance, the parent company of TikTok, as a means of direct involvement in business operations.
The Chinese government’s plan to acquire stakes in local operations of tech giants Alibaba and Tencent, typically amounting to about 1%, is referred to as “golden shares.” These shares come with special rights over business decisions and have been used by the state since 2015 to exert influence. On January 4th, a division under the state investment fund established by the regulator Cyberspace Administration of China acquired 1% of an Alibaba subsidiary, Guangzhou Lujiao Information Technology. The stakes, also known as “special management shares” in China, are aimed at allowing the government to have more direct involvement in business operations. Alibaba, which owns social media entities such as Youku and the web browser UCWeb, is among the companies affected by the move.
According to the Financial Times, the Chinese government is also following a similar approach with Tencent, which operates popular streaming service Tencent Video, as well as other offerings such as WeChat, music streaming, and gaming. The government already has a stake in a local entity owned by Kuaishou, a smaller competitor of ByteDance’s Douyin, through state-owned Beijing Radio and Television Station.
According to the Financial Times, Bilibili, the Nasdaq-listed streaming service that initially catered to anime, gaming, and comic fans, is reportedly seeking a state-owned entity in Shanghai to acquire shares in one of its subsidiaries.
