Chinese authorities continue to regulate local technology companies. Today it became known that the government now has a seat on the board of directors of ByteDance. The unprecedented decision made experts again concerned about the prospects of investing in the Celestial market.The deal was concluded on April 30, but it has only become publicly known now.
According to Bloomberg, the Internet giant has sold 1% of its shares to WangTouZhongWen Technology, which is owned by three state organizations. Among them are the investment fund China Internet Investment Fund and the TV company China Media Group.
It is worth clarifying that we are talking about the sale of shares only in Beijing ByteDance, which is focused on the local market and manages Douyin (the Chinese version of TikTok) and the Toutiao news service. This company is a “daughter” of ByteDance Ltd, and therefore the government is unlikely to get access to TikTok and the international market.
As part of the deal, WangTouZhongWen was able to appoint its own person to the board of directors of ByteDance. Thus, the Chinese government actually got a seat on the board of the Internet giant.
Previously, Chinese authorities have repeatedly invested in local technology companies, including Ant Group and Didi Global. However, the state has never managed to get a seat on the board of directors of a private business.
The appointment of a person from the government to ByteDance took place against the backdrop of growing control of China’s technology industry by the authorities. Fearing the rapid growth of companies, Beijing has begun to take a number of actions to regulate and contain them.
Antitrust investigations have begun against Alibaba Group and a number of other giants this year and user data security checks have been initiated. Also, the Chinese authorities have actually banned private educational services from earning money from their business and entering the stock exchange.
In early August, shares of Tencent, NetEase and other major gaming companies collapsed after criticism of video games by state media. And the appointment of their man to the board of directors of ByteDance was perceived by investors as another wake-up call.
Back in May, Zhang Yiming announced his resignation as CEO of ByteDance. Initially, this decision was associated with the businessman’s attempt to distance himself from the latest economic turmoil in China. However, against the background of information about the April deal, Imin’s resignation has a new context.
According to experts, with the help of such actions, China prevents ByteDance from entering the international stock exchange. It’s all about the large amount of data that the company operates and that can pose a threat to national security. Against the background of the above-mentioned unrest and the unprecedented appointment of his person to the board of directors of ByteDance, there are also concerns that in the future the Chinese market may become unsuitable for investment.