Coming from the Chinese government which is currently preparing for the 19th CPC National Congress another news that has surprised no-one: According to a report from Wall Street Journal quoting unnamed sources, the party is planning to take a stake in Tencent, Sina Weibo, and Alibaba’s Youku Tudou which will enable it to appoint government officials to the companies’ boards and influence their operations. The 1% stake called “special management shares” is already being trialed in two media startups, Yidian Zixun and Beijing Tiexue Tech, which operates a patriotic media website.
According to WSJ, the decision could mean that the Chinese government would have easier access to troves of data held by local tech companies covering social media, transportation, finance, medical, and more.
Certain companies believe that the plan will fail because of potential shareholder litigation and the high cost of stock ownership. According to recent data, Tencent’s share price fell after the report was published. Some commentators have pointed out that the market could see this news as a positive because party ownership in these firms will mean regulatory risks will be reduced. However, it might cause them problems in Western markets.
The Chinese government has begun discussing the idea since last year. In the meantime, over 35 Chinese tech companies have quietly instituted party committees which are to make sure that firms do not stray from the path of socialism with Chinese characteristics. In preparations for the Congress, the party has also called on Chinese entrepreneurs to put patriotism before profit.
In recent months, tech companies in China have faced the usual pressures from regulators which appear before important political meetings. Tencent, Weibo, and Baidu were heavily fined in September over banned content. WhatsApp, a messaging app owned by Facebook, was blocked for a short while in the country. WeChat has made group administrators responsible for overseeing illegal content shared by group members. Airbnb bookings were banned in Beijing for the Congress period while local media have announced the possibility of strengthening the Great Firewall around the city with an additional “fire moat.”