SHANGHAI -- The suspension of Ant Group's much-awaited stock market debut, reportedly at President Xi Jinping's behest, is only one sign of the Chinese government's increasing domination of private-sector companies.
China's government, state-owned enterprises or state-backed funds have taken de facto control of 51 companies so far this year, up from around 20 to 30 in 2018 and 2019, disclosures by listed companies show.
The increase comes as Xi advances a "dual circulation" strategy meant to cut the economy's dependence on foreign demand and prepare for a long struggle with Washington.
The Wall Street Journal reported Thursday that Xi himself made the decision to halt Ant's initial public offering. It cited as the direct trigger an October speech by controlling shareholder Jack Ma that criticized excessive government regulation of the financial sector.
The company behind the Alipay mobile platform, which boasts more than 1 billion users, had been set to raise nearly $40 billion in what would have been a record-breaking IPO. Regulators have come out with new rules stepping up scrutiny of financial technology companies, putting pressure on the fast-growing field.
This is one method Beijing uses to strengthen state control over the private sector. Another is capital involvement.
Some of this year's cases of de facto takeovers are rescues of businesses hit by the coronavirus pandemic, but others involve companies with strategic significance, in such fields as semiconductors, wind power and pharmaceuticals.
In September, an investment fund backed by the Henan Province city of Luoyang signed a contract with industrial robot manufacturer Saimo Technology that would make it a controlling shareholder. Luoyang Guohong Investment Group received more than 20% of Saimo's outstanding shares -- including some held by top leadership -- along with nearly 10% of additional voting rights.
Such deals, which grant control over a business through voting rights without a majority stake, are commonplace in China.
The trend comes as the country's relations with the U.S. look increasingly unlikely to recover. U.S. President Donald Trump on Thursday banned Americans from investing in companies linked to the Chinese military. Though U.S. President-elect Joe Biden is set to take office in January, the change will not eliminate the deep-seated suspicion toward Beijing in Washington.
Earlier this year, state-backed funds acquired more than 60% of shares in a subsidiary of Semiconductor Manufacturing International Co., China's largest chipmaker. These transactions provided financial support amid tightening American sanctions on SMIC.
Beijing's dual circulation, announced in September, rests on the assumption of increasing government influence over the private sector. The plan will move China further away from the concept of improving efficiency through competition that underpins market economies.
Concerns have been raised about the impact of state influence on companies' long-term management. Return on equity at listed Chinese companies has fallen from 13% in 2010 to just 7% in 2019, with a particularly steep decline after Xi took power as general secretary of the Communist Party in 2012.