China government pushes for stake in local tech giants Tencent, Alibaba, others

Tencent Chairman and Chief Executive Officer Pony Ma Huateng attends a news conference announcing the company's results in Hong Kong, China March 17, 2016. REUTERS/Bobby Yip

The Chinese government is said to be pushing for a stake and a direct role in corporate decisions in a bid to keep a check on the rapidly-growing power of private technology firms.

According to a Wall Street Journal report quoting sources, Chinese internet regulators are talking about taking 1 per cent stakes in internet giant Tencent Holdings, Chinese content creator Weibo Corp and Alibaba‘s video content firm Youku Tudou.

A 1 per cent stake in Tencent could be pegged at around $4 billion while that of Weibo would be over $200 million.

The minority stakes will also provide the government easier access to the wealth of internet users’ data base.

The news comes a week before a large Communist Party meeting with the party pushing to take a greater role in Chinese society.

Even as strict regulations are already in place the regulators are concerned about the growing power of private technology business.

Tencent Holdings, for example,  is a Chinese investment holding company whose operations spread across media, entertainment, payment systems, smartphones, internet mobile phone value-added services and operate online advertising services in China.

Executing its project of “special management shares”, which was floated last year, Chinese government has taken up stakes of less than 2 per cent in mobile news site Yidian Zixun and Beijing Tiexue Tech, which operates a patriotic news site, said the WSJ report.

Over the last one year, the Chinese government increased its online censorship, cracking down on banned content, rumors, among others.

Founders of China’s technology giants including Alibaba’s Jack Ma and Tencent’s Pony Ma have turned to appeasing the government by showing intent to invest billions of dollars for China’s economic and social growth.

Alibaba, Tencent and search engine company Baidu, and others, recently agreed to invest $11.7 billion in wireless carrier China Unicom, furthering a government goal of bringing private money into state companies.

Earlier this year,  China also came down heavily on “irrational” overseas investments, putting some of the the biggest players under tight scrutiny.  Large private conglomerates pushing a wave of aggressive deal making overseas were at the receiving end. It led to the detention of at least one Chinese tycoon and causing some companies to scrap deals and sell assets.

It was reported recently that  top European companies in China had raised their concerns about the growing role of the ruling Communist Party in the local operations of foreign firms as well.

Party organisations exist in nearly 70 per cent of some 1.86 million privately owned companies, according to the official China Daily. Companies in China, including foreign firms, are required by law to establish a party organisation. However, it has not been a source of worry for companies and seen only as a symbolic move.

Also Read:

China’s bitcoin market alive and well as traders defy crackdown