Contrary to the market-oriented economic policy of the past 40 years, the Chinese Communist Party is set to take greater control over technology and telecommunications companies, with a return to the era of “joint ventures” between the state and the private sector. .
China’s market regulator has approved a new joint venture between the investment arm of state-owned telecom giant China Unicom and tech giant Tencent, the agency said in an announcement posted on its website. official last week.
The joint venture was “based on the strategic needs of the company’s overall advancement in the digital economy,” according to statements filed by China Unicom on the Shanghai and Hong Kong stock exchanges.
Tencent brings to the deal a massive amount of data gleaned from its super app WeChat which provides social media, payment and messaging services to 1.4 billion people in China and beyond.
However, Unicom Innovation Venture Capital will hold a 48% stake compared to the 42% stake of Tencent subsidiary Shenzhen Tencent Industry Venture Capital, state-owned newspaper Global Times reported.
Meanwhile, China Mobile’s Shanghai subsidiary signed a strategic cooperation agreement with e-commerce giant JD.com’s subsidiary JD Technology on Nov. 1.
The joint venture’s focus is on smart city technology, digital governance, big data and communications, Shanghai Securities News reported.
Sources close to the private sector in China said more similar deals are expected by the end of the year, with major private tech companies being assigned a state-owned “partner”, meaning that the state will effectively take control of at least some of their assets.
The move follows a regulatory crackdown on private tech giants during the last years.
In July 2021, public assets spokesman Peng Huagang said his agency would pursue “mergers” between the private sector and public companieswith takeovers implemented through both paid acquisitions and no-compensation nationalizations, as well as share transfers.
Chang Yu, a Hangzhou-based researcher, said the nationalization process now appears to be accelerating following the 20th National Congress of the Communist Party of China last month.
“Everyone knows that this public-private ‘partnership’ only works one way,” Chang told RFA. “Even before the party congress, the government opposed [what they termed] the disorderly expansion of capital, and ceased to allow private enterprise to expand.”
“Now that the party congress is over, they can speed up this process and take more drastic measures.”
Beijing-based commentator Wu Qiang said the moves are another indicator that Chinese leader Xi Jinping is steering China away from the market reforms introduced by the late Supreme Leader Deng Xiaoping in 1979, and in the direction of an economy controlled by the state similar to that of the Mao era.
“It heralds an era of planned economy as mentioned in [Xi Jinping’s] report to the 20th party congress,” Wu told RFA. “It will put private capital, especially Tencent and JD.com, under the control of the Beijing government.
“Looking at the ownership structure, it seems like a sort of hybrid joint venture driven by ideology,” he said.
Wu said it was made clear at the party congress that no one should lobby to protect or support big private companies.
“Last protections and lobbying [attempts] for these huge online platforms have been taken down,” he said.
News commentator Ma Ju said the purpose of joint ventures was to secure state control over resources and technology.
“The purpose of the cooperation agreements between China Unicom and Tencent and China Mobile and JD.com is [state] control over the flow of information and materials,” Ma told RFA. [the Chinese Communist Party]Everything about the internet is a matter of national security.”
“They control these companies just like they did in 1953, through public-private ‘partnerships,'” he said.
Political commentator Jiang Feng said some private companies may eventually be eliminated.
“Private businesses encourage a market economy, which runs counter to a totalitarian regime, so they should be restricted or even eliminated,” he told RFA’s Asia Wants to Talk chat show. .
“They lay the foundations for a command economy.”
China’s wealthy are looking for a way out
Reports are emerging that China’s wealthiest people get the message, with home electronics tycoon Huang Guangyu and his wife selling their shares in their private retail empire GOME, taking in up to HK$960 million (US$122.3 million) and reducing the size of their stake from 51.5% to 42.8% during this year.
Nanjing-based retailer Xu Jing said many wealthy business owners were very pessimistic about their future in China and would leave if they could.
“Wanting to leave and being allowed to leave are not necessarily the same thing…because [entrepreneurs may now be] on a government [border] checklist because they have a lot of debt,” Xu said. “Especially real estate bosses.
Changsha-based real estate insider Tian Hui gave a similar account. “Business is not good right now; revenue is low, but expenses are on the way,” he said. “Returns are too slow, and there are bank loans [to pay back].”
“[The wealthy] have been selling famous art and properties since 2019, and they take the money to the United States to buy land and build properties there,” he said.
Scholar Ma Hong jokingly said he was referring to a 1980s Chinese rock anthem by Cui Jian, “Rock and Roll on the New Long March”.
“These rich and bigwigs are all heading for the new Long March, because now the government is promoting socialism in the new era,” Ma said.
Translated and edited by Luisetta Mudie.