Within China the stakes are known as “special management shares” and since 2015 have become a common tool used by the state to exert influence over private news and content companies.
That was the aim of China’s internet regulator when it took a stake in an Alibaba unit last week, according to two people involved in the matter. An entity under the state investment fund set up by the Cyberspace Administration of China (CAC) acquired a 1 per cent share of an Alibaba subsidiary, Guangzhou Lujiao Information Technology, on January 4, according to Chinese business records.
CAC took the stake to tighten control over content at the ecommerce giant’s streaming video unit Youku and web browser UCWeb, the people said. As part of the deal the unit also appointed a new board member, Zhou Mo. CAC has a mid-level official with the same name.
It is unclear what rights the government will gain in many of the deals. China’s media regulator in 2016 advised state groups taking special management shares to demand at least a 1 per cent stake, a board seat and the right to review content.
The specifics of the government’s plan to take golden shares in Tencent remain under discussion, but will involve a stake in one of the group’s main China operating subsidiaries, three separate people briefed on the matter at Tencent said.
“The state is not going away, this is the trend for the future,” said one of the people.
Another person close to Tencent said the group was pushing for a government entity from its home base of Shenzhen to take the shares, instead of bringing in the Beijing-based state investment fund that took the stakes in the units of Alibaba, ByteDance and Weibo, China’s version of Twitter.
(Tencent has a majority stake in Grinding Gear Games - NZ’s largest game developer with its $105m revenue last year - and a minority stake in Dunedin-founded global hit-maker RocketWerkz. And in October last year, Tencent took a minority stake in Digital Confectioner, a Christchurch-based game studio with a dozen staff.)
Chinese officials have used a variety of state groups to take the holdings. Executives at Nasdaq-listed streaming service Bilibili are pushing for a state entity in Shanghai to take shares in one of its subsidiaries, two people briefed on the matter said. When the government took a 1 per cent stake in short-video maker Kuaishou’s key onshore company last year, it turned to state-owned Beijing Radio and Television Station.
Documents seen by the Financial Times detail how the golden share arrangement works at ByteDance. They show how the government tightened its grip over the TikTok parent’s main Chinese entity in April 2021. A CAC-connected fund joined two other state groups to pay Rmb2mn for a 1 per cent stake in the unit, called Beijing ByteDance Technology.
The state groups took the shares through an entity called WangTouZhongwen (Beijing) Technology, which won the right to nominate one of Beijing ByteDance’s three directors. Communist party official Wu Shugang was appointed to the board. Wu headed CAC’s division supervising online commentary for several years and as part of the job visited companies around China to lead study sessions on the party and President Xi Jinping.
He gained attention a decade ago for saying, “I only have one wish — that one day I can cut off the dog head” of liberal Chinese people with western values, in a tweet to his personal Weibo account. “Let the Chinese traitors preaching so-called ‘human rights and freedom’ go to hell!!” he added.
In his role as a director of ByteDance’s main Chinese unit, Wu has a say over its “business strategy and investment plans”, any merger or acquisition, profit allocation and a vote on the group’s top three executives as well as their remuneration packages, the company charter shows.
While Beijing ByteDance’s other two directors can outvote Wu on some issues, the company bylaws show Wu was given the power to control the content at ByteDance’s media platforms in China. These platforms included the news aggregator app Jinri Toutiao and TikTok’s sister app Douyin, with Wu given the right to appoint the group’s chief censor, known at Chinese internet groups as the “editor in chief”.
“Appointing or dismissing the editor-in-chief requires approval from [WangTouZhongwen’s] director,” the company bylaws state. The documents show Wu was also given the right to chair a “content safety committee” set up within Beijing ByteDance, or alternatively appoint the committee’s chair. Board meetings are to be held at least every quarter or whenever Wu proposes them.
Last year executives at the TikTok parent changed the Beijing unit’s name to Douyin Information Service, removing “ByteDance” from its title in an effort to distance the China operations and Wu from its global products, two people briefed on the matter said.
ByteDance said the unit held licences for Douyin and Toutiao and that it had “no ownership, visibility or input into ByteDance’s global operations”.
Tencent and Kuaishou declined to comment. Alibaba, Bilibili and Weibo did not respond to multiple requests for comment. CAC did not respond to a faxed request for comment.
Written by: Ryan McMorrow in Beijing, Qianer Liu and Cheng Leng in Hong Kong
Additional reporting by Nian Liu in Beijing
© Financial Times
