The Chinese Communist Party (CCP) is tightening the reins on private high-tech giants by acquiring voting shares or using party branches within the companies as the military’s intelligence assistant. The move to exert greater control over private industries has the United States and EU on alert.
On March 11, Belgium’s prime minister said the country is banning TikTok from government phones over concerns about cybersecurity, privacy, and misinformation. Belgium followed the lead of the United States and the EU in banning the video-sharing app, developed by Chinese internet technology giant ByteDance.
CCP’s ‘Golden Share’ in Private Companies
A Jan. 13 report in The Financial Times revealed how the CCP controls the country’s high-tech group ByteDance.In April of 2021, a fund associated with the Cyberspace Administration of China (CAC), along with two other state-owned units, paid 2 million yuan ($290,000) for a 1 percent equity stake in Beijing Douyin Information Service Co., a subsidiary of ByteDance. Through this acquisition, CAC was granted the right to nominate one of three directors of ByteDance.
The 1 percent “golden share” gave the CCP voting rights and influence over business decisions in the private tech firm. “Golden shares” or “special management shares” give their owners—often governments—some level of control over companies.
Wu Shugang, the former supervisor of CAC’s online commentary monitoring department, was subsequently appointed to the board of directors of ByteDance.
Along with a say in ByteDance’s business strategy and investment plans, mergers and acquisitions, profit sharing, and voting rights for the group’s top three executives and their remuneration, Wu also has a say in the content of ByteDance’s Chinese media platforms. These platforms include the news platform “Today’s Headlines” and TikTok’s Chinese version, Douyin. Moreover, Wu can appoint the group’s chief censor, chair its content security committee, or appoint the committee’s chairman.
TikTok Exposed for Leaking US Data
In 2022, the year after the communist regime bought “golden shares” of ByteDance, TikTok was exposed for leaking data from U.S. users.The United States and the EU, however, gave little credence to those claims, clearly realizing that private technology companies in China are closely intertwined with the communist regime.
The CCP’s “golden shares” strategy extends to other Chinese technology companies with an overseas presence as well.
U.S.-listed companies such as Chinese microblogging site Sina Weibo, media outlet 36 Kr, tech and financial media outlet Qutoutiao, and mobile content aggregator and Hong Kong-listed short-form video app Kuaishou, are among those controlled by golden shares holder CAC, according to the CNN report.
Communist Party Branches at Private Companies
In addition to acquiring golden shares, the CCP secures its grip over private companies by establishing party branches within both state-owned enterprises and privately owned companies.Internet companies, in particular, are a crucial target in the effort to build party branches. Thriving party branches operate at Alibaba, Tencent, Baidu, and internet shopping platforms Temu and Jingdong. Jingdong’s party branch may be the most massive, with a reported 10,730 members and 154 Party branches nationwide as of 2018. At Jingdong, party members can pay their party dues directly on the internal app.
Almost all these internet giants are listed in the United States. Meanwhile, ByteDance has an enormous presence in the United States through its subsidiary TikTok, which has more than 150 million active U.S. users.
Close Ties Between Intelligence Department and Private Companies
Zach Dorfman, a senior fellow at the Carnegie Council for Ethics in International Affairs, wrote in December 2020 about the growing ties between CCP intelligence and Chinese companies.China’s national intelligence law, enacted in 2017, required Chinese businesses to work with Chinese intelligence and security agencies when requested to do so.
At the time of Dorfman’s report, the U.S. intelligence community had obtained extensive evidence of coordination, including back-and-forth data transfers between so-called private companies and CCP intelligence, with one Trump-era national security official citing evidence of close public-private cooperation on a “daily basis.”
The CCP intelligence services ask Chinese technology companies to help them process huge amounts of data, such as data obtained from the hack of the U.S. Office of Personnel Management, Evanina said. This data then quickly flows to CCP agencies.
Dorfman quoted U.S. officials as saying that by using the data processing capabilities of Chinese companies, CCP spy agencies can quickly sift through large amounts of information to find key details of intelligence value. For example, they might cross-check real-time travel intelligence with other information gathered by China’s Ministry of State Security in order to identify an undercover CIA agent.
Chinese companies typically avoid mentioning their relationship with the Party. In public, especially in Western countries, they deny any ties to communist intelligence or military agencies. Huawei, for example, claims that the company is employee-owned. However, domestically, these companies have repeatedly demonstrated their loyalty to the party and have assisted its security services.
The Defeat of Free Market Processes
“China’s taking of golden stakes in U.S.-listed companies is a theft of American shareholder value, a threat to U.S. national security, and the defeat of free market processes by a totalitarian regime that should be illegal,” Anders Corr, founder of Corr Analytics and publisher of the Journal of Political Risk, told The Epoch Times on March 11.“In China, individuals and companies have no protection against the state,“ said Corr, an Epoch Times columnist. Companies have no legal recourse against intelligence services that ”require sensitive information to maintain one’s freedom or the continued operation of a business.”
The move to more tightly link private companies to the CCP “demonstrates the increasing intensity of CCP control over what is left of the private sector in China, as Xi strengthen[s] his lock on the party,”Corr stressed.
That control is a grave threat not only in China but overseas as well. “The more that Beijing is allowed to make inroads into free market processes, the more powerful the Chinese Communist Party becomes, including here at home in the United States.”