Wall Street Journal Chinese recently reported that the Chinese government is considering investing in one or two percent of the shares, called “special administrative stock” in Chinese domestic high-tech companies. Trials have started in two companies. This ownership investment is intended to acquire one or more seats on the board of privately owned large high-tech companies in order to participate in their management and operations. Over the past 20 years, Chinese high-tech companies have enjoyed massive growth and obtained significant shares in critical industries such as financial, insurance, transportation, communication and entertainment. These companies also own a large amount of data regarding the day-to-day behavior of the Chinese population. Examples of these companies are Tencent and Alibaba. Owners of these companies privately expressed their deep concerns about this potential move, since this type of government stock ownership may result in lawsuits for those companies that trade overseas. For the Chinese government, the cost is also a concern. For example, just to hold one percent of Tencent will require US$4 billion. The biggest worry among shareholders and the company owners is the potential to lose independence as well as the capability of innovating.
Source: WSJ Chinese, October 12, 2017