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Chinese government wants stakes in widely-held web giants

China’s regulatory body for internet security is said to be in discussions for ownership stakes in tech giants such as Tencent and social media units under Alibaba, according to industry reports.

Chinese authorities aim to take board seat by buying stakes in high flying internet giants that are widely held in many funds for sale in Asia.

According to a Wall Street Journal report, the state is considering 1% ownership in the form of “special management shares”, which has the potential to influence company decision-making.

Companies the state is targeting include Tencent and two social media platforms under Alibaba, Weibo and Youku, the report said.

The investment concern is that initial ownership stakes could increase or spread to other companies and ultimately work against the strategic growth plans of the expanding internet giants.

Tencent became one of the most widely-held companies in Asian equity portfolios but it is also a holding in many poor performing China funds.

Although the technology firms are seen as a pillar of China’s new economy, surveillance over internet information remains a government priority.

With the cybersecurity law enacted earlier this year, the surveillance body in China has fined microblog service Weibo and Tencent’s messenger-operator WeChat for disseminating what it sees as fake news and other inappropriate information on their platforms. The new law is set to monitor internet content that might “jeopardize national security”.

Government media has also became vocal over the issues in the internet space. In July, the communist party’s People’s Daily (in Chinese) described a mobile game developed by Tencent as “a toxicant”.

Funds with the biggest weighting in Tencent*

Templeton Asian Dividend A Acc USD  10.24%
JPM Greater China A Dis NAV HKD  10.20%
Templeton China A Acc USD  10.13%
BOCHK China Consumption Growth  10.60%
Allianz Choice Asian Ord C  10.00%
Source: FE. *66 funds registered for sale in Hong Kong have a 5% or more weighting in Tencent.

Part of the Mark Allen Group.