China is reportedly acting to take “golden shares” in local units of Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (OTC: TCEHY) as part of the government’s efforts to have a greater role in overseeing the country’s large technology groups.

While the government backed away from heavy-handed fines and sanctions to rein in the country’s largest tech groups, it is increasingly snapping up small equity stakes in the local operations of big tech firms such as TikTok owner ByteDance, reported the Financial Times.

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The stakes, usually a 1% share of internet groups’ key companies, are similar to “golden shares” as they have special rights over certain business decisions, the report said.

What Happened: An entity under the state investment fund set up by the Cyberspace Administration of China acquired a 1% share of an Alibaba subsidiary in Guangzhou on Jan. 4, the report said, citing Chinese business records.

CAC acquired the stake to tighten its grip over content at the company’s streaming video unit Youku and web browser UCWeb, FT reported, citing sources. The unit also appointed a new board member, Zhou Mo (a mid-level CAC official has the same name) as part of the deal, as per FT.

Meanwhile, the specifics of the government’s plan to acquire golden shares in Tencent remain under discussion, but will include a stake in one of the group’s main China operating subsidiaries, FT reported, citing sources. “The state is not going away, this is the trend for the future,” one of the sources was quoted as saying.

Another person close to Tencent reportedly said the group was nudging for a government entity from its home base of Shenzhen to take the shares, instead of bringing in the Beijing-based state investment fund that took the stakes in the units of Alibaba, ByteDance and Weibo.

Price Action: Shares of Alibaba and Tencent were trading marginally higher on Friday morning.

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