As Beijing formalizes a greater role in overseeing the country’s powerful tech groups, China is on the move to grab a “golden stake” in local divisions of Alibaba and Tencent.
The Chinese government has responded to the economic slowdown by withdrawing from harsh fines and sanctions that have characterized a campaign to curb the country’s biggest tech group, but it has also spooked foreign investors.
The crackdown has eased, but the government has stepped up its efforts to buy small stakes in local operations of big tech companies, as it recently did to the owners of TikTok. byte dance.
This gives the Communist Party a mechanism to stay deeply involved in their business, especially the content they broadcast to millions of Chinese people.
This share, which typically contains a 1% stake in the Internet Group’s major entity, resembles a ‘golden share’ as it carries special rights to certain business decisions.
Within China, shares are known as “special management shares” and since 2015 have become a common tool used by the state to exert influence over private news and content companies.
That was what the Chinese internet regulator was after when it took a stake. Alibaba unit last week, according to two people involved in the matter. An entity under the State Investment Fund established by the China Cyberspace Administration (CAC) acquired a 1% stake in Alibaba’s subsidiary in Guangzhou on January 4, according to Chinese business records.
CAC has acquired shares to give it more control over the content of e-commerce giant Youku and web browser UCWeb, said the people. As part of the deal, the unit also appointed a new board member, Zhou Mo. The CAC has a mid-level official of the same name.
It is unclear what rights the government will acquire in many of the deals. In 2016, China’s media regulator recommended that state groups acquiring special management shares require at least a 1% stake, a seat on the board of directors, and the right to review content.
The details of the government’s plan to acquire Tencent’s golden stake are still being debated, but when it comes to taking a stake in one of the group’s main Chinese operating subsidiaries, three people briefed on the matter at Tencent official said.
“The state will not go away. This is the trend of the future,” said one official.
Another person close to Tencent said rather than bring in a Beijing-based state-owned investment fund that has acquired stakes in Alibaba, ByteDance and Weibo, Tencent wants a government agency in its home city of Shenzhen to acquire the stakes. He is asking for it. Chinese Twitter.
Chinese officials have used various national groups to acquire stakes. An executive at Nasdaq-listed streaming service Bilibili said the Shanghai state-owned company is asking him to acquire a stake in one of its subsidiaries, he said after being briefed on the matter by two people. Stated. The government turned to the state-owned Beijing Radio and Television station last year when it acquired a 1% stake in a key onshore company in short video production company Kuaishou.
A document seen by the Financial Times details how the golden share arrangement works at ByteDance. They show how in April 2021 the government tightened its control over his TikTok parent company, a major Chinese entity.
The state-owned group acquired shares through an entity called WangTouZhongwen (Beijing) Technology, which acquired the right to nominate one of the three directors of Beijing ByteDance. Communist Party cadre Wu Suogang was appointed to the board of directors. For several years, Mr. Wu led the department that oversees the CAC’s online commentary, and as part of his job, he visited companies across China and led study sessions on the party and President Xi Jinping.
Ten years ago, he tweeted to his personal Weibo account that a liberal Chinese with Western values “only hopes for the day when I can cut off the head of a dog.” “Go to hell for those traitors in China who preach so-called ‘human rights and freedoms’!” he added.
As director of ByteDance’s main China division, Wu has a say in “business strategy and investment plans,” mergers and acquisitions, profit sharing, voting for the group’s top three executives, and their compensation packages. increase. Company charter show.
Two other directors of Beijing ByteDance can vote against Wu on several issues, but according to the company’s bylaws, Wu is empowered to control content on the ByteDance media platform in China. I’m here. Those platforms include news aggregator app He Jinri Toutiao and his TikTok sister app Douyin, with Wu appointing the group’s chief censor known as “editor-in-chief” on the Chinese internet his group. given the right to
“The appointment or removal of an Editor-in-Chief requires the approval of: [WangTouZhongwen’s] directors” in the articles of incorporation of the company. Wu was also given the right to chair or appoint a chairperson to a “content safety committee” set up within Beijing ByteDance, according to the documents. Board meetings will be held at least quarterly or as proposed by Wu.
Last year, executives at TikTok’s parent company, TikTok, renamed its Beijing division Douyin Information Service and dropped “ByteDance” from its title to distance itself from its operations in China and Wu’s global offering. said two officials briefed on the matter.
ByteDance said the division holds licenses to Douyin and Toutiao and “has no ownership, visibility or involvement in ByteDance’s global operations.”
Tencent and Kuaishou declined to comment. Alibaba, Bilibili and Weibo did not respond to multiple requests for comment. The CAC did not respond to a faxed request for comment.
Additional reporting by Nian Liu in Beijing
