China May Finally Ease Crackdown on Tech Firms (opens in new tab) Instead of the strict approach that led to Alibaba being fined billions of dollars, tech CEO Jack Ma temporarily disappearing from the public eye, and the slow approval of gaming, the Financial Times reports (opens in new tab) that the government has changed course and is now taking a more "hands-on" approach, with Tencent moving toward acquiring "special management shares," or "golden shares," in many of China's major high-tech companies, including Tencent.

These golden shares are relatively small, usually around 1%, but give the acquirer rights to certain managerial decisions and personnel matters in the acquired company. The golden shares that the government wants Tencent to acquire are still under consideration, but according to sources interviewed by the FT, they would cover shares in Tencent's main Chinese subsidiaries, and Tencent had lobbied for the Shenzhen-based state agency to acquire the shares rather than the Beijing-based company.

We do not know what authority this stock deal will ultimately grant, but we can get an idea by referring to other similar transactions. For example, when a state agency acquired a golden share in ByteDance, the owner of TikTok, it gained the power to appoint one of the company's three directors. The government chose to appoint a high-ranking official named Wu Shugang (open in new tab), who could exercise a certain influence over the company's business strategy and, importantly, got the power to appoint the editor-in-chief of the ByteDance media platforms: these platforms show This is an important influence over the content.

In short, while the Chinese government appears to be loosening its grip, it has a firm grip on the helm when it comes to the country's high-tech and gaming sectors. For the past three years, we have had to watch in horror as the Chinese state's strict oversight has caused stock prices to fluctuate wildly (open in new tab). It is unlikely that the state will openly do something as drastic as the Didi ban (open in new tab) in the near future.

Moreover, Tencent has removed more than 100 corrupt staff (opens in new tab) in the last year alone and reported some of them to local police. One has to imagine that the company has gained some leeway from the government in this one case.

This golden share arrangement is more likely to affect content in China than that exported abroad, but in the short term it may water down the rapid expansion of Chinese companies into non-Chinese markets. A report published by Barron's last year (opens in new tab) highlights how the overseas expansion of companies like Tencent has been driven by the fact that the government has effectively blocked them from the Chinese domestic market. If the state is indeed loosening its grip, these companies may choose to eat in rather than eat out.