BEIJING – Alibaba Group Holding and Tencent Holdings shares slid on Friday on a report that government entities are set to take so-called “golden shares” in units of China’s two largest Internet firms, suggesting Beijing is moving to exert greater control over the sector.
An arm of the Cyberspace Administration of China (CAC) took 1 per cent of an Alibaba digital media subsidiary in Guangzhou on Jan 4, according to corporate database Qichacha. The company’s media portfolio includes businesses such as streaming platform Youku and mobile browser UC Web. A new director who shares the name of a CAC official was appointed that same day, records showed, confirming a Financial Times report.
Chinese state organs have for years invested billions of dollars into high-profile private start-ups, from Didi Global to billionaire Jack Ma’s Ant Group. In recent years, as Beijing clamped down on every sphere of the Internet, official agencies have also taken nominal stakes of typically 1 per cent – a golden share that in theory allows Beijing to nominate directors or sway and veto important company decisions. TikTok owner ByteDance and Weibo are among the major Internet firms to have disclosed that sort of arrangement.
The fund vehicle that bought into Alibaba is backed by the CAC along with prominent state firms such as Citic, China Post and China Mobile, the database showed. Discussions are also under way about a government entity taking a similar stake in Tencent, the FT reported, citing people involved in the matter.
The discussions are emerging as Beijing prepares to loosen its grip on the world’s largest Internet arena and move past a bruising crackdown that has enveloped almost every Internet sphere for well over a year. Signs are growing that President Xi Jinping’s administration, keen to revive the world’s No. 2 economy, is reversing course on campaigns against gaming addiction and preparing to unfetter firms such as Alibaba that drew government scrutiny.
“To me, the news is slightly positive,” said Mr Banny Lam, head of research at CEB International Investment. “The two have been struggling with the issues of crackdown in recent years. For both Alibaba and Tencent, the government stake could potentially help them to get the green light to do business in new areas and lower the risks of further clampdown by the regulators.”
Tencent dipped more than 2 per cent, while Alibaba was down as much as 1.6 per cent in a largely unchanged Hong Kong market.
A Tencent spokesman declined to comment, while an Alibaba spokesman did not respond to a request for comment. BLOOMBERG