The Chinese government is buying "gold stocks" in several giant tech companies, including Alibaba, Tencent and ByteDance. The purchase of these shares will make the Chinese government more involved in the company's business.
These gold shares are usually equivalent to 1% of the company. These shares, which are also known as 'special management shares', give the Chinese government control over certain business policies in companies.
This share ownership allows the Chinese Communist Party to have greater influence in China's technology sector, especially to control the content available on the platform.
For example, in the case of Alibaba, China's internet regulator, through a state investment company, last week bought a 1% stake in one of Alibaba's subsidiaries, Guangzhou Lujiao Information Technology.
The share purchase aims to tighten control over content on Alibaba's Youku video streaming platform and UCWeb web browser. The subsidiary also has a new board member who turns out to be a top Chinese regulator.
Meanwhile, the Chinese government's plan to buy Tencent shares is still in the discussion stage. But Tencent reportedly wants regulators from Shenzhen to buy its shares, not those based in Beijing like those who bought Alibaba shares.
The same regulator also bought a 1% stake in ByteDance, TikTok's parent company. Chinese Communist Party official Wu Shugang also joins the company's board of directors, as quoted by Business Insider, Saturday (1/14/2023).
Wu will have a say in determining business and investment strategy, merger plans, and profit allocation as well as control over content for ByteDance's media platforms in China.
This share purchase contrasts with the harsh penalties Chinese technology firms usually receive. The Chinese government usually imposes penalties to control technology companies deemed to violate the rules.
Market conditions in China which are currently sluggish due to the COVID-19 lockdown and the loss of foreign investors seem to be forcing the Chinese government to re-evaluate its approach to the technology sector.