China’s Crackdown on Big Tech: the Role of Golden Shares

As part of our ongoing research into China’s techno-economic landscape, Datenna analysed the role of golden shares and the complex relationship between the Chinese government and its tech industry.

  • Chinese government’s crackdown on Big Tech involved the acquisition of symbolic 1% equity shares, known as golden shares, in key tech companies.
  • An example is Sina Weibo’s parent company, Beijing Weimeng Chuangke, where government-acquired golden shares followed stringent content regulations in 2021.
  • This move showcases how golden shares were used to exert influence after regulatory actions and fines were imposed on the company for allowing inappropriate content on its platform.
  • The identification of these golden shareholders provides analysts with crucial insights into Chinese government concerns and Party-State interests.
  • The use of golden shares exemplifies the complex relationship between the Chinese government and its tech industry.

China’s crackdown

The role of golden shares in the Chinese government’s crackdown on its tech industry has recently received considerable foreign media attention. Late 2020 marked the beginning of a crackdown on China’s Big Tech out of concern that it was gaining too much influence and the central government was losing its grip.  Consequently, the government took measures to regulate the industry through antitrust investigations, new regulations on data security and privacy, and stricter regulations on online content, and ultimately took steps to acquire golden shares in some key companies.

What is a golden share?

A golden share is a symbolic one per cent equity share which grants the holder the power to appoint a director on the board, veto decisions, and have a more direct say over content issues. Typically, this one per cent share is directly owned by a specific entity, which is, in turn, controlled by government-backed companies or funds. This measure reaffirms the government’s ability to strengthen oversight and ensure compliance with data security laws and alignment with the state’s agenda. While Guo Shuqing, chairman of China’s Banking and Insurance Regulatory Commission and member of the Party Committee of the People’s Bank of China, officially announced the end of the crackdown in early 2023, analysts maintain that increased state monitoring and oversight on tech companies is here to stay. As an example of a golden share acquired to exert government influence, let’s take Sina Weibo’s parent company, Beijing Weimeng Chuangke Network Technology Co., Ltd. The golden share in Weimeng Chuangke was acquired after Sina Weibo, one of the largest social media platforms in China, was impacted by a series of new regulations on online content that required social media platforms to take greater responsibility for the content posted by their users and to censor content more strictly in 2021. This led to the company being fined for allowing inappropriate content to be posted on its platform, with other restrictions on its services following soon after. A golden share acquisition by Wangtou Tongda (Beijing) Technology Co., Ltd, which is owned by multiple government entities and state-owned enterprises, allows the central government to leverage Party-State interests in influential companies while only acquiring a marginal 1% share.

Government entities may directly or indirectly hold such a golden share in tech companies. Identifying a golden shareholder may give analysts a crucial insight by exposing the Chinese government’s concerns and recognising Party-State interests the government may want to exert on its influential sector. While the tech industry continues to grow rapidly and becomes more vital to China’s economy, it will also continue to pose significant challenges to the government’s control and authority. The government’s efforts to regulate and control the tech industry are driven by its desire to balance the market-based benefits of technological innovation with its need to maintain political stability and control. This being said, the challenge of regulating online content and big tech is not unique to China. Governments worldwide are working on similar questions. The use of ‘golden shares’ to exert influence over domestic tech companies is just one example of how the Chinese government shapes its complex relationship with technology.