ByteDance Scales Back Investments Ahead of Crackdown

TikTok owner ByteDance is scaling back its investment operations in expectation that China will restrict the type of deal-making that has fueled the growth of the country’s tech giants.

As Bloomberg News reported Wednesday (Jan. 19), sources say the company is shuttering its venture capital and investment team that backs startups while overhauling its strategic investment arm.

This move is happening as regulators in China are looking at putting the brakes on deals by ByteDance and companies like Tencent Holdings and Alibaba, deals which the government says give social media and gaming companies too much power.

The Cyberspace Administration of China (CAC) is putting together guidelines requiring any company with more than 10 billion yuan ($1.6 billion) in revenue or more than 100 million users to get the agency’s blessing before raising funds or making investments.

While these rules would apply to several companies in China, Bloomberg notes that ByteDance would be one of the first to take pre-emptive steps to comply.

In a statement emailed to Bloomberg, ByteDance said it made a decision earlier this month to focus on bolstering its business and reducing the number of investments, and will also reassign members of the its strategic investments team to other business lines.

Read more: Chinese Regulators Going After Algorithms, Big Tech’s Secret Sauce

The new CAC regulations are part of a larger effort aimed at curbing tech companies in China. Regulators have also introduced rules — set to go into effect March 1 — saying a company cannot use algorithm recommendations if any Chinese laws have been broken.

The rules also state that if a recommendation service offer news, the company must be licensed. Users must be notified about the recommendation’s purpose and be given an opportunity to opt out.

Read more: China Tightens Rules, Requires Company Data Review Before Listing Overseas

And beginning in mid-February, the CAC will impose rules requiring platform companies with more than 1 million users to go through a security review before listing their shares overseas.

“With stock market listings, there is a risk that key information infrastructure, core data, important data or a large amount of personal information could be impacted, controlled or maliciously used by foreign governments,” the CAC said earlier this month.