The Chinese government is understood to have taken a small but significant equity stake in Kuaishou, China’s second largest short video platform and a direct rival to Douyin, the Chinese half of TikTok.
The stake was acquired through Beijing Radio and Television Station, which is controlled by the Beijing municipal government. It invested RMB1.01 million ($140,000) for a 1% per cent stake in Beijing Kuaishou Technology, the mainland Chinese unit of Kuaishou, according to records on Chinese corporate data provider Qichacha, cited by media including the South China Morning Post.
The unit also holds broadcast licenses and is majority-owned by Kuaishou’s co-founder Yang Yuanyi.
The transaction was not reported to the Hong Kong Stock Exchange, where Kuaishou shares are listed. But this may not be required as the shares of many Chinese firms which are listed on stock markets outside the mainland are financial proxies and do not represent ownership.
The same day that the investment was recorded, Kuaishou appeared to appoint a Beijing Radio and Television Station executive Shi Yesen to its board of directors.
Both the investment by a SOE and the board appointment are in keeping with a policy of the Chinese government to exercise increasing control of private sector media companies, including the right to review content.
In August, Kuaishou claimed 587 million monthly average users. That number may include users from its significant overseas operations in developing countries including Brazil, Pakistan and Indonesia.
Last year, Internet Investment Chinese (Beijing) Technology, another SOE, took a 1% stake and a board seat in Beijing ByteDance Technology Co, a mainland China subsidiary of TikTok owner ByteDance. In April 2020, state-owned Wang Tou Tong Da (Beijing) Technology Co acquired a 1% stake in popular social media platform Weibo. That also gives the state-owned investor the right to appoint a board director.
The independence and data sharing practices of Chinese social media companies has come under scrutiny in the U.S. and Europe. In recent weeks, TikTok was accused of tracking locations of individual U.S. citizens.
Citing national security concerns, Donald Trump, in the final months of his term as U.S. president, issued an executive order that threatened to ban TikTok in the country unless ByteDance, parent of both Douyin and TikTok, sold a controlling interest in TikTok to American investors. U.S. federal courts blocked Trump’s order. In June this year, nine Republican senators revived concerns about TikTok’s China ties, sending TikTok CEO Shou Zi Chew a letter “demanding answers on TikTok’s backdoor data access for Beijing,” a reference to China’s Communist regime.
And last week, TikTok updated its privacy policies for European users, adding explicit disclosures that personal data from the app may be viewed by employees in China.
India has banned Chinese apps including TikTok due to suspicion of Chinese government influence.