Chinese government takes "golden shares" in Alibaba, Tencent; FBI raided NYC Chinese police station & From wolf-warrior to backyard pooch: Zhao Lijian moved to obscure post -- China Boss News 01.16.23

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The Big Story in China Business

Beijing takes “golden shares” in Alibaba, Tencent

“China has acquired minority stakes with special rights in two domestic units of tech giant Alibaba Group Holding Ltd (9988.HK),” Reuters reported on Friday. “Beijing has been taking 'golden shares' in private online media and content companies for more than five years, and in recent years expanding such arrangements to companies with vast troves of data,” news staff said.

Reuters:

The stakes taken over the last four months in the Alibaba units are the first ones to come to light for the e-commerce firm. Alibaba has been one of the most prominent targets of China's two-year-long regulatory crackdown on tech giants.

These golden shares, typically equal to about 1% of a firm, are bought by government-backed funds or companies which gain board representation and/or veto rights for key business decisions.

Financial Times’ analysts said that the move was Beijing’s way of “formaliz[ing] a greater role in overseeing the country’s powerful tech groups.” Although it's not immediately apparent "what rights the government will gain in many of the deals,” China's ministry for media regulation once "advised state groups . . . to demand at least a 1 per cent state, a board seat and the right to review content," they said.

FT:

While the heavy-handed crackdown has ebbed, the government is increasingly snapping up small equity stakes in the local operations of big tech companies, as it recently did with TikTok owner ByteDance.

This provides the Communist party with a mechanism to remain deeply involved in their businesses, particularly the content they broadcast to millions of Chinese people.

A source “briefed on the matter at Tencent” told FT that “[t]he state is not going away,” and that “this is the trend for the future.”

FT:

Chinese officials have used a variety of state groups to take the holdings. Executives at Nasdaq-listed streaming service Bilibili are pushing for a state entity in Shanghai to take shares in one of its subsidiaries, two people briefed on the matter said. When the government took a 1 per cent stake in short-video maker Kuaishou’s key onshore company last year, it turned to state-owned Beijing Radio and Television Station.

For the rest of Reuters’ report, China acquires 'golden shares' in two Alibaba units, click here. For FT’s in-depth coverage, China moves to take ‘golden shares’ in Alibaba and Tencent units, click here.

Law and International Xi

2023 kicks off with news of an FBI raid on overseas Chinese police stations and new US push to counter China

The New York Times last week reported that FBI counterintelligence agents in 2021 searched an "office building on a busy street in New York’s Chinatown" for evidence of illegal Chinese police presence.

NYT:

The search represents an escalation in a global dispute over China’s efforts to police its diaspora far beyond its borders. Irish, Canadian and Dutch officials have called for China to shut down police operations in their countries. The F.B.I. raid is the first known example of the authorities seizing materials from one of the outposts.

Earlier in the week, “[t]he House voted to establish a select committee to assess the myriad military, economic and technological challenges posed by China — kicking off an effort that was a major pillar of the Republican national security agenda,” Politico said.

Politico:

House Speaker Kevin McCarthy hailed the establishment of the panel. The resolution creating the committee was the second measure the Republican-led House passed, and McCarthy promised the new panel will help “win this economic competition” with Beijing after winning the speaker’s gavel last week.

“Here’s the good news: There is bipartisan consensus that the era of trusting communist China is over,” McCarthy said Tuesday on the House floor.

House members followed up with a vote to ban the sale of U.S. oil reserves to China, which passed by a landslide, but is “not likely to be taken up in the Democratically-controlled Senate,” Bloomberg said, because the move is seen as “ploy [for Republicans] to lower gas prices before the November midterm elections.”

Axios learned that “[t]he Biden administration is leaning toward making its executive order on U.S. investments in China more focused and targeted than some of the earlier suggestions.” (For additional reading, see The Washington Free Beacon’s piece: Batteries Not Included: Biden Carves Out Major Exception to Investment Restrictions in China.)

Axios:

What we're watching: While the final language hasn’t been approved, it appears that the executive order will focus more on quantum computing, artificial intelligence and semiconductors and not include biotechnology or battery technology.

The big picture: Russia’s war in Ukraine, the pandemic-induced supply chain disruptions, and China’s more aggressive behavior in the Western Pacific has led to a new bipartisan consensus that the U.S. should do more to choke off China’s military – and technological – growth.

And, finally, the Department of Justice announced that “[a] Berklee College of Music student, who is a citizen of the People’s Republic of China (PRC), has been indicted by a federal grand jury in Boston in connection with allegedly stalking and threatening [another student] who posted fliers in support of democracy in China.”

Although the DOJ made no mention of the victim’s citizenship, she is also, likely, a Chinese national as the stalker threatened to report her to the Ministry of Public Security who, he said, would “greet her family” in China. Here’s what I said on LinkedIn:

China Boss, January 11th

Tracking this case in 2023. Sending or recruiting "little pinks" abroad to harass, spy and report on Chinese #students is essential to preventing dissent at home. If DOJ is successful in prosecuting Wu, it sets precedent that could significantly disrupt the Chinese government's control. Beijing would be highly motivated to ensure that doesn't happen. The last time Xi wanted to send a message about the arrest of a Chinese national instrumental to public security, two Canadians were taken hostage and ransomed for Huawei's surveillance tech princess Meng Wanzhou.

For the rest of NYT’s report, With F.B.I. Search, U.S. Escalates Global Fight Over Chinese Police Outposts, click here. For Politico’s news, House establishes tough-on-China select committee, click here. For Bloomberg’s report, GOP-Led House Votes to Ban Sale of Oil Reserves to China, click here.

To read Axios’ “scoop,” Scoop: White House narrowing executive order on China investments, click here, and for the DOJ’s announcement of Xiaolei Wu’s indictment, People’s Republic of China Citizen Indicted for Allegedly Stalking, Threatening Individual Promoting Democracy, click here.

Geopolitics

PLA conducts another joint combat drill ahead of German officials visit to Taiwan