Tag Archives: Cyberspace Administration

China Formalises State Guidance Of Its Tech Platforms

Screenshot of Youku hope page captured January 14, 2023

AN INVESTMENT FUND set up by the Cyberspace Administration has acquired a stake and a seat on the board of an Alibaba subsidiary to control the content of one of China’s leading video streaming services, Youku.

The ‘rectification‘ of the tech sector is being completed — or at least having a line drawn under the current phase — by government agencies acquiring golden shares in many of the country’s major domestic internet platforms.

The ‘special management’ shares confer a 1% stake and special powers over a company’s operations. The aim, as in the case of Youku, is to control the content hosted on the platforms and the data they create more tightly.

A government entity yet to be decided will reportedly take a stake in the video business of Tencent, the gaming and social media conglomerate. ByteDance, which owns TikTok, and Weibo reportedly already have such an arrangement.

The policy appears to have been quietly pursued for some time in less prominent companies and subsidiaries of the major platforms. The special management shares formalise for the tech platform giants the ultimate and arbitrary power that authorities already hold over businesses in China.

Doing so will allow for it to be exercised more routinely and precisely, removing the need for the heavy-handed and disruptive measures taken during the crack-down on tech over the past couple of years to rein in the tech platforms’ power.

It also cements the intention of aligning the tech companies with Party and state policy, and delegates implementation to the appropriate agency.

Since 2017, the Party has pursued closer guidance of entrepreneurs and made clear its expectation that entrepreneurs will be ‘patriotic’. The tardiness of the sector in responding led to the use of the stick in preference to the carrot over the past two years.

Tech company resources will henceforth be more diligent in redirecting resources to upgrading the ‘real economy’ and other policy goals such as preventing private monopolies, improving conditions for gig workers and regulating fintech.

There is nothing particularly novel in the concept of the Party or state being in the vanguard of the organisation of economic activity.

In traditional industry, state-owned enterprises played the industrial policy steering role. The tech sector never had those, allowing private companies to flourish in their absence.

That vacuum has now been filled, and government agencies will set about the competitive business of building the next generation of national champions.

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