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China takes steps to tighten control over Tencent with golden share

The Chinese government has taken a “golden share” in a domestic subsidiary of tech giant Tencent Holdings (0700.HK), a company registration database showed, the latest sign of China stepping up its control over its tech sector.

Wangtou Zhicheng, an entity controlled by the Chinese government, now owns a 1% stake in Shenzhen Yayue Technology after an investment of 600,000 yuan, according to database Qichacha, which said the deal happened on Oc. 18.

Tencent, the world’s largest video game company and the operator of the WeChat messaging platform, declined to comment.

The Information first reported Wangtou Zhicheng’s investment in Shenzhen Yayue. Wangtou Zhicheng is owned by the China Internet Investment Fund, which was established by China’s cyberspace regulator and finance ministry.

It marks the continuation of a trend that has seen Chinese government-backed funds or companies take an about 1% stake in key subsidiaries of data-rich companies such as ByteDance and Alibaba Group.

These stakes, known as “golden shares”, sometimes involve a board seat or other rights, allow the government to gain access to online data and monitor these companies’ business activities.

Shenzhen Yayue Technology, whose business involves information technology and internet services, was previously 100% owned by a Tencent subsidiary before the stake change took place on Wednesday, according to Qichacha. Pony Ma, chairman of Tencent, controls the subsidiary.

Beijing’s moves to scoop up golden shares in tech companies, which started more than five years ago, have also raised alarm among foreign governments about China’s surveillance of online data and potential intervention in private enterprises.

Reuters reported earlier this year that China has acquired minority stakes with special rights in two domestic units of Alibaba.

The Financial Times first reported Beijing’s plan to acquire a golden share in a Tencent subsidiary earlier this year. However, it can take a year or longer for evidence of this to publicly appear on company registers.

Reuters reported that ByteDance, owner of TikTok and its Chinese sister app Douyin, agreed to the government taking a golden share at one of its China subsidiaries in late 2019, a year and a half before the stake in the unit was registered. Reuters

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