China's golden tech grab and how it could unfold

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By Angela Huyue Zhang | Oct 03, 2022

Image courtesy of and under license from Shutterstock.com

Since 2020, a flurry of new rules and regulations have been introduced that were intended to curb the excesses of China’s tech giants and assert greater government control over them. ‘Golden share’ arrangements, in which government entities acquire stakes and board seats in private companies, could help make regulation more predictable and ensure that companies’ business strategies are better aligned with government policy, but such arrangements also carry risks of their own.

HONG KONG – Hopes are rising that China’s embattled tech giants will finally get a reprieve from the severe legal and regulatory crackdown that has wiped out over USD1.5 trillion of the value of their shares. Amid mounting challenges to economic growth, some Chinese government officials have signaled a possible shift to a new strategy: the acquisition of a 1 percent equity stake – or a so-called ‘golden share’ – in major tech firms. Still, the question remains: will this approach really brighten the outlook for China’s tech industry?

A new approach is certainly needed. The authorities’ efforts to discipline Chinese tech firms over the last 18 months has been both clumsy and extremely costly, featuring a raft of opaque and unpredictable regulations. The abrupt suspension of Ant Group’s initial public offering (IPO) in late 2020, the record antitrust fines imposed on Alibaba and Meituan, and the surprise cybersecurity investigation into Didi Chuxing all spooked investors and sent share prices

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