Exclusive-Concerned about data security, the Chinese government expands the use of ‘gold stocks’

FILE PHOTO: Illustration of Chinese truck-hailing apps Huochebang and Yunmanman
FILE PHOTO: Chinese truck-hailing apps Huochebang and Yunmanman, owned by Full Truck Alliance, are seen on a mobile phone in this illustration photo taken July 5, 2021. REUTERS / Florence Lo / Illustration / File Photo

December 15, 2021

BEIJING (Reuters) – The Chinese government has been expanding its minority stakes in private companies beyond those specializing in news and online content to companies that own large amounts of data. whether important, two people with knowledge of the matter said.

It has entered into a de facto special management share or “golden share” agreement with Full Truck Alliance Co Ltd, a Chinese platform that arranges trucking services, according to one of them.

The troubled Didi Global Inc has also negotiated a share of the gold for its core ride-hailing business, said a third source with direct knowledge of the matter.

Seeking influence, Beijing started taking a gold stake in private online media companies – usually about 1% of a company – five years ago. Shares are purchased by government-backed funds or companies to gain board seats and/or veto power over key business decisions.

Authorities also now want some control over a large amount of data owned by certain companies, the sources said, adding that this data is considered a national asset at risk. hacked and misused, including by foreign countries.

“They have extended their attention to other companies that own important data on such shares,” said one person with direct knowledge of how some state investors handle such shares. strategically and is seen as an operator of critical information infrastructure.

Usually there is no proof of a gold stake until share ownership is publicly registered but that can take a year or longer. The person added that more gold stocks in data-rich companies will come to light, adding that the authorities are now more ready to highlight their ownership.

A separate source said recently a gold stock was taken in a data-rich company but declined to disclose which stock it was.

Reuters could not determine how many other data-rich companies the administration is looking to take up a stake in gold.

Disavow sources were identified due to the sensitivity of the issue. The internet regulator, the Cyberspace Administration of China (CAC), did not respond to a request for comment.

Feng Chucheng, a partner at Beijing-based consulting firm Plenum, said gold stocks are a “sword of Damocles hanging over the heads of the companies that own them, a reminder that data security is currently being closely monitored by the authorities”.

The expansion of their use is in line with China’s tougher stance on data protection. New data privacy laws went into effect in September, as well as other rules that force operators of critical information infrastructure to conduct security checks and risk assessments.


Full Truck Alliance revealed in May that the China Internet Investment Fund (CIIF) has become a shareholder. The fund is backed by the CAC, and holding it – taken around 2019 or 2020 – is in essence a special equity management arrangement, according to one source.

Full Truck Alliance and CIIF did not respond to requests for comment.

Didi’s talks about a gold stake are part of a corporate restructuring plan, according to a separate source. That restructuring comes after Didi angered Chinese regulators by pushing for an IPO in the US despite being asked to pause for a cybersecurity review, prompting authorities in July to issue order to take down their apps from the app stores.

Didi also did not respond to a request for comment.

Both Full Truck Alliance and Didi are listed in the US, and the CAC investigated both in July.

One source said that US-listed companies or those looking for US listings are more likely to attract attention when authorities think about companies they want a controlling stake in. special reason.


The Chinese government is also focused on controlling online content. Two sources said that Ximalaya, like Spotify, is in discussions with a Shanghai government agency to buy a special management stake.

Ximalaya declined to comment. A representative of the government agency, the Shanghai Municipal Radio and Television Administration, could not be reached for comment.

The internet content sector has faced tighter scrutiny since 2017 when rules were revised to mandate government investment in “online news and information providers”. eligible”. That same year, online media platforms were also required to obtain a license to disseminate news and other content.

ByteDance, the owner of TikTok and Chinese sister app Douyin, has agreed to split a gold stake in one of its subsidiaries in China by the end of 2019, a year and a half before its shares are sold. sign up, according to a source.

ByteDance did not respond to a request for comment.

The source added that accepting a special management share would be helpful for companies to obtain these licenses.

Executives of news aggregators Yidian Zixun and Qutoutiao have also sold shares to government-linked entities while Sina News sold a stake in an affiliated company, public records show. shows.

News aggregator ByteDance, Jinri Toutiao and three other news apps all obtained licenses to operate within two years after agreeing to share the gold.

Council seats held by government-related officials need not directly affect day-to-day operations, a separate source said.

The CAC appointed an official, Wu Shugang, to sit on the board of the ByteDance unit, in which a subsidiary of CIIF holds its gold shares. The source said: “Although Wu has an office at one of ByteDance’s facilities in Beijing, he rarely attends meetings and ByteDance often deals directly with the CAC.

Reuters could not be reached for comment.

(Reporting by Yingzhi Yang and Cheng Leng in Beijing and Julie Zhu in Hong Kong; Editing by Brenda Goh and Edwina Gibbs) Exclusive-Concerned about data security, the Chinese government expands the use of ‘gold stocks’

Bobby Allyn

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