Private companies with state-connected investors increased from 14.1% of all registered capital in China in 2000 to 33.5% in 2019
IT MIGHT BE confused for one of the world’s savviest tech investors. The portfolio of China Internet Investment Fund is the envy of venture capitalists everywhere. It owns part of ByteDance, the Beijing-based parent of social media group TikTok, and Weibo, the Twitter-like platform. It has a stake in SenseTime, one of China’s most advanced artificial intelligence groups, and Kuaishou, a popular Chinese short-video service. The firm’s investment list reads like a who’s who of the industry.
CIIF’s investment spree is symptomatic of a new form of state capitalism that is taking shape in China. Under the aegis of President Xi Jinping, regulators in recent years have unleashed a sustained attack on the technology sector, deeming it to have gained too much influence and strayed too far from the Communist Party’s core values. Tech magnates such as Jack Ma, the co-founder of e-commerce giant Alibaba, have been subdued.
The jump in private companies invested in by the state since 2000 has accounted for nearly all of China’s increase in new registered capital. Public investments in private-sector companies surged from $9.4bn in 2016 to $125bn in 2020, though looks set to fall this year, according to data from Dealogic, a research firm .
Unwittingly tagging along for the ride have been global investors who had once spent freely to gain a foothold in the booming Chinese market. Americans and others are unlikely to be comfortable with the new arrangements. More might get snared: CAC, the ultimate power behind the state investments in tech, was recently given the authority to vet the overseas share listings of large Chinese tech groups.
ByteDance has claimed the CIIF investment has little influence over operations. If that is true then Chinese tech giants have decided on their own volition to mirror new state policy. The TikTok owner, for example, has become one of the first large Chinese tech companies to officially limit working hours to 10am-7pm on weekdays. The firm is among those whose founders have departed during the crackdown.
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