Meet your new shareholder: the government – China’s latest top news

Chinese government to take stake in internet companies?

The Wall Street Journal says (paywall) that Chinese internet regulators “have discussed taking 1% stakes with social-media powers Tencent Holdings Ltd. and Weibo Corp. and with Youku Tudou, a YouTube-like video platform owned by e-commerce titan Alibaba.” The article quotes a source who says that “small startups will get direct investment from state-owned firms, while larger deals will be done by government-backed funds,” but that the biggest companies may be forced to “donate” shares to the government.

The Journal says that “Beijing began floating the idea of special management shares” in tech companies in 2016. If the newspaper is correct that Tencent, Weibo, and Youku Tudou are early targets of the move, it suggests that the aim is to exert greater control of social media platforms, which already put significant resources into censoring and controlling their users’ messages.

What will investors make of the news? Discussions about it that I have been privy to seem to fall into two opposing interpretations: Some see the news as negative for the companies, while others believe that government holding shares will actually reduce risk from regulators.

Today’s reading on the 19th Party Congress and Chairman Xi

If you can’t get enough news about President Xi Jinping and the Communist Party’s 19th Congress, the meeting set for next week when the leadership team and policy direction for the next five years will be announced, here is a selection of interesting reading:

• On Macro Polo, Damien Ma says that despite the extraordinary power that Xi has in his hands, and the official adoration of Xi that some call a personality cult, Xi will probably “still be bound by certain core ideas of how the Party-state behaves and functions.” Ma borrows “from the CCP’s preference for numerology” and call the core Party ideas “the Four Avoids and Three Imitates”:
  • Avoid the Soviet Union’s political sclerosis and collapse.
  • Avoid India’s raucous and unbridled democracy.
  • Avoid Japan’s economic bust and subsequent stagnation.
  • Avoid Latin American-style urbanization and shock therapy.
• At the same time:
• Imitate American economic dynamism and military might.
• Imitate elements of the European social welfare state.
• Imitate Singapore’s competent authoritarian governance.
• The Economist’s latest cover story (paywall) is titled “China’s Xi Jinping has more clout than Donald Trump. The world should be wary.” It concludes that “the world does not want an isolationist United States or a dictatorship in China. Alas, it may get both.”
• The Fairbank Center for Chinese Studies has published a handy infographic titled “How the CCP rules, a guide to China’s leaders of Party and State.”
• Bill Bishop of the Sinocism newsletter says: “And so we wait. It is striking how little we know, less than we did days before previous recent Party Congress. Xi has dramatically changed information distribution and flows.”
• Yukon Huang, former country director for China for the World Bank and senior fellow in the Carnegie Asia Program has published an article on East Asia Forum titled “Xi’s power grab might drag the economy down.”