Brief: Beijing in talks to take direct control of tech giants with 1% stake

Photo credit: wu yi / Unsplash.

The news (extracted from the Wall Street Journal):

• Chinese regulators want more direct control of Tencent, Twitter-like Weibo, and Youku Tudou, a video-streaming platform owned by Alibaba, according to sources at The Wall Street Journal.
• In exchange for a one percent stake, regulators would be able to appoint a government official to the companies’ boards and have influence over operations.
• The Chinese government has already trialed ‘special management shares’ of less than two percent with news platforms Yidian Zixun and Beijing Tiexue Tech.

Why it matters:

• The idea of taking a stake in tech companies was first reported last year. Since then, the Chinese government has ramped up online censorship, cracking down on banned content, rumors, and even celebrity gossip social media accounts.
• In particular, tech giants like Alibaba, Baidu, and Tencent have taken a hit as their influence on China’s society and economy grows. In September, WeChat started holding chat group owners responsible for all content shared in their groups.
• Influential tech leaders, such as Jack Ma and Pony Ma, are taking pains to stay on the government’s good side. Alibaba’s charismatic founder is setting up a US$15 billion charity fund, aligning with President Xi Jinping’s goal of alleviating poverty in China by 2020.
• Consumer-facing tech firms also hold a wealth of data about Chinese users – all of which will become more accessible to government officials if they join the company’s board.