China has acquired ‘Golden Shares’ in a couple of domestic subsidiaries of the tech giant Alibaba Group Holding Ltd, strengthening its control over the company. Beijing is also proposing to get similar shares in Tencent Holdings and other tech giants, revealing its plans to sway the power equation of technology companies in the country. Other firms which already have such golden share arrangements include subsidiaries of TikTok owner ByteDance, Kuaishou Technology, Weibo, etc.
‘Golden Shares’ are a type of share that gives its holder veto power over the company’s major decisions, even though he or she may not be a majority shareholder. In the case of Alibaba Group, the government has acquired a minority stake of about 1% which comes with special management rights. The government purchases such Golden Shares in tech giants through government-backed funds or state-run companies. It then appoints a government representative to the board of directors with veto power to change any major decision taken by the company.
The Alibaba group has been a target of a severe crackdown by the regulatory authorities over the past few months. Apart from Alibaba, several other homegrown technology giants like Tencent, Didi Global Inc, etc also faced the government’s wrath. During the two-year regulatory crackdown, hefty fines and penalties were imposed on tech giants, which erased more than $1 trillion in the market value of these firms.
With the zero covid policy and the subjugation of the major tech industries, the economic structure of China has worsened over the years. The restrictions and censorship on E-sports alone have wiped out millions from the Chinese economy.
China’s gaming revenue for 2022 stood at a whopping $44bn. With more than 655 million mobile gamers and a $24 billion market share, the government cannot afford to lose gaming and other internet and technology businesses. Thus, it seems like Beijing is now acquiring management rights in major tech giants to reform and revive the sector.
Therefore, the plan to acquire Golden Shares and gain special management rights can be seen as a sign of revival, to end the two-year crackdown, and move past the severe censorship.
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(Source)
