China Boosts Control by Buying Stakes in ByteDance, Weibo

China is strengthening its control of Internet content companies by increasing regulatory scrutiny, buying stakes in companies and filling board seats among other actions. Most recently, a state-backed company purchased 1 percent of the shares of ByteDance, parent company of TikTok, which gave it the right to appoint a director to its board. Weibo also sold a 1 percent stake to a state investor and gave it a seat on its board of directors. China has discussed owning shares of social media companies since 2016.

The Wall Street Journal reports that, “the corporate stakes are the latest move in a multiyear campaign by Beijing to establish a foothold inside influential social-media and news platforms and, more broadly, to tighten control over public opinion on China’s Internet.”

Weibo, which has 530 million monthly active users, in filings with the U.S. securities regulator in April 2020, said the state-backed company that bought a 1 percent stake had the right to appoint a director to Beijing Weimeng Technology, its parent company’s three-person board, and also had “veto rights over certain matters related to content decision, and certain future financings of Weimeng.”

The Cyberspace Administration of China, the country’s main Internet regulator, has also “dispatched officials to Internet media platforms regularly this year … offering guidance with respect to censoring online content and ensuring government rules are enforced.”

The government stakes, dubbed “special management stakes,” was “first outlined in a Communist Party plenum in November 2013 — the same year Xi Jinping formally assumed China’s presidency.” China also “issued new draft guidelines that would prevent its Internet companies from engaging in anticompetitive practices such as unfairly blocking rival platforms.”

Business Insider reports that, in the Chinese government’s purchase of a stake in ByteDance, “TikTok itself does not appear to be directly implicated.” During the Trump administration, ByteDance was “a flashpoint,” and, this week, Senator Marco Rubio (R-Florida) again “called on the Biden administration to ban TikTok in America.”

“The Biden administration can no longer pretend that TikTok is not beholden to the Chinese Communist Party,” he said. “Beijing’s aggressiveness makes clear that the regime sees TikTok as an extension of the party-state, and the U.S. needs to treat it that way.” News of China’s recent ownership stakes in Weibo and ByteDance “comes as a flurry of regulatory actions against Chinese tech companies has tanked share prices for some of the world’s biggest firms.”

Investment management company BlackRock “advised boosting exposure to China, saying that it should no longer be thought of as an emerging market … advising portfolio allocations as high as 10 percent to Chinese stocks, versus around 4 percent for many global baskets.”

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