By Yingzhi Yang and Brenda Goh
BEIJING/SHANGHAI (Reuters) -The Chinese government took a stake and a board seat in a key ByteDance entity this year - a move that raises questions over how much influence Beijing is planning to wield in a tech sector reeling under an onslaught of regulatory action.
The 1% stake in Beijing ByteDance Technology, which holds some of the licences for Douyin, the Chinese version of TikTok, as well news aggregator Toutiao, was registered on April 30, according to corporate information app Tianyancha.
It is held by WangTouZhongWen (Beijing) Technology which is owned by three Chinese state entities including a fund backed by the country's main internet watchdog, the Cyberspace Administration of China (CAC), government shareholder data shows.
The holding does not represent a stake in TikTok nor its parent company ByteDance, which is incorporated in the Cayman Islands, said a person familiar with matter who was not authorised to speak to media and declined to identified.
While there is precedent for the Chinese government to hold shares in tech firms, news of the stake - first reported by online magazine The Information - comes amid a surge in antitrust probes and new rules https://www.reuters.com/business/media-telecom/china-issues-draft-rules-banning-unfair-competition-internet-sector-2021-08-17 for the industry, upending a previously laissez-faire approach by authorities.
"I think this all arises out of a concern within the Chinese government that private technology companies were gaining too much data and too much power, and so should be construed as a move by the Chinese government to rein them in and take control," said Paul Haswell, a Hong Kong-based partner at law firm Pinsent Masons.
"This practice is likely to continue, with the government taking greater stakes and exerting more control, essentially turning many of these tech companies into SOE (state enterprise)-lite type entities," he said, adding that the government's actions could make it difficult for Chinese firms to do business overseas.
The CAC did not immediately respond to a faxed request for comment about the purpose of the government's holding.
A ByteDance representative said Beijing ByteDance Technology "only relates to some of ByteDance's China-market video and information platforms, and holds some of the licenses they require to operate under local law."
WEIBO AND OTHERS
The central Chinese government similarly holds a 1% stake in a key unit of Twitter-like Weibo (NASDAQ:WB) called Beijing Weimeng Technology, according to Chinese government data and filings made to the U.S. securities regulator.
Weibo did not immediately respond to a request for comment. In the SEC filing, it said its unit received the investment from in April 2020 and that the investment vehicle which is called WangTouTongDa (Beijing) Technology had the right to appoint a director to Weiming's three-member board.
WangTouTongDa is owned by the China Internet Investment Fund (CIIF), which was established by CAC and the country's finance ministry in 2016.
CIIF has an assets under management target of 100 billion yuan ($15.4 billion), according to its official website.
It has invested in online content platforms Kuaishou Technology and popular podcast firm Ximalaya, artificial intelligence startups SenseTime and CloudWalk, as well as China's Uber (NYSE:UBER) for trucks, Full Truck Alliance.
($1 = 6.4846 Chinese yuan)