China Roundup: Beijing Takes Stake in ByteDance, Amazon Continues China Crackdown

China Roundup: Beijing Takes Stake in ByteDance, Amazon Continues China Crackdown

Hello and welcome to the China Roundup of TechCrunch, the latest events that shape the Chinese tech landscape and what they mean to people around the world. This week, investor concerns grew when news came that the Chinese government had taken a part in ByteDance, TikTok’s parents and one of the world’s largest private internet companies.

Meanwhile, Amazon’s crackdown against Chinese sellers continues and is forcing many South Chinese businesses to go out of business and the government has passed a comprehensive data protection law that will take effect in November.

The Chinese government’s master plan continues to demand more control over the country’s Internet behemoth. This week, Information reported that a domestic entity in ByteDance sold a 1% stake to a government affiliate in April. The agreement was recorded on Tianyancha, a database of publicly available corporate information, as well as the official enterprise registration index. The move did not come suddenly. Beijing was thinking of small shares of private technology companies at the beginning of 2017 tech.

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China Roundup: Beijing Takes Stake in ByteDance, Amazon Continues China Crackdown

The Wall Street Journal reported at the time that Internet regulators had discussed a 1% stake in companies including WeChat operator Tencent, Weibo like Twitter, and Youku like YouTube. In April 2020, China Internet Investment Fund, controlled by China’s top Internet watchdog, bought a 1% stake in WangTouTongDa, Weibo, for 10 million yuan, according to a filing with the US Securities Regulator. Weibo did not mention WangTouTongDa’s relationship with the state in his filing.

Similarly, ByteDance sells 1% shares to three companies established by top regulators: China Internet Investment Fund; China Media Group, controlled by the Communist Party’s propaganda department; And the investment branch of the Beijing Municipal Government. Republican Senator Marco Rubio also called on President Joe Biden this week to block tick-tock in the United States in response to Beijing’s move on ByteDance.

It remains unclear how much power Beijing has gained over ByteDance since taking a small part, but the Weibo release gives some clues to investors. It is important to note that the government shares the internal management of both Weibo and ByteDance. Chinese internet companies often set up offshore entities that are entitled to the financial benefits of their mainland Chinese activities through contractual agreements.