The Chinese authorities will buy a "golden share" in bigtech. Why it's good for stocks

China's stock market is buzzing as the government prepares to loosen controls on private business and anti-COVID restrictions, thus supporting the economy.How sustainable is the policy change and what can investors expect?

In the ongoing confrontation between the authorities and the Chinese technology sector, a new round has been outlined: Chinese government structures are preparing to acquire "golden shares" in the subdivisions of Alibaba Group and Tencent Holdings in order to gain greater control over key players in the Chinese it market.

The easing of pressure on China's private companies, along with the expected end of the draconian "zero tolerance" policy for covid-19, are meant to support the country's slowing economy and its stock market.

Owning a stake in a company, often as little as 1%, theoretically allows the government to appoint directors or influence key decisions of the company and can give officials a tool to influence the industry in the long run. In CHINA, this mechanism is known as “special management shares” and has been used since 2015 as a tool for state control over business.

The problems of the Chinese technology sector began in 2021 - then the regulators stopped the preparation of the IPO of Ant Group, the financial division of Alibaba. Some time before, the founder of the company, Jack Ma, spoke critically of the Chinese authorities - it was then that the departments paid close attention to technology companies and their founders.