Chinese government holds “gold stake” in Alibaba, Tencent: Maintain control over tech giants

A new step for China’s technology sector

This news comes as Beijing is preparing to relax the controls on the technology sector that it has implemented for the past three years. With this share structure, the government could theoretically intervene in the appointment or change important decisions of enterprises. This gives the authorities a tool to maintain influence over the Chinese tech industry in the long term.

According to data firm Qichacha, a division of the Cyberspace Administration of China has a 1% stake in Alibaba’s digital-traditional company in Guangzhou. This business manages platforms like Youku and the UC Web mobile browser. A new director with the same name as the CAC official was appointed as soon as the share takeover took place.

Currently, there are more and more signs that China is trying to revive the world’s No. 2 economy. One of them is the loosening of control over the technology sector, which has been considered the engine of economic growth for many years. Even Didi Global Inc. may also be back in operation next week.

Spokesmen for Tencent and Alibaba were not immediately available for comment. Shares of these businesses were also little changed in the session on January 13.

“For me, this news is a bit positive. Both Tencent and Alibaba have struggled with tight regulations. Now, a government stake can give them the green light to enter new business areas and reduce the risk of further regulation,” said Banny Lam, head of research at Ceb. International Inv Corp Ltd., said.

In the past, China has invested billions of dollars in well-known private companies in the startup sector, from Didi to Ant Group. In recent years, as Beijing tightens its grip on the internet, agencies have also received a nominal 1% stake, commonly known as a “gold stake”.

Although it is unclear how Beijing will implement the shareholding, analysts speculate that having the government have a say in business leadership could create many regulatory advantages. ByteDance Ltd., owner of TikTok and Weibo Corp. All of them have given 1% of the gold shares to a specialized agency of the Chinese Government.

Beijing repeatedly reverses strict policies

In recent weeks, there have been consecutive indicators that China is turning around its strict management policies in a variety of fields, from technology to real estate. In December, China abruptly removed restrictions on Covid-19 control, causing widespread change. After that, they also ended the two-year ban on coal imports with Australia.

Even the policy of three red lines, which is considered to be the cause of the crisis in the Chinese real estate market, is being eased. Accordingly, Chinese real estate enterprises will have easier access to capital as long as they do not violate the “limits” set out in this policy.

Reference: Bloomberg