Hong Kong CNN Business  — 

Tencent is dramatically cutting its stake in JD.com, China’s second largest e-commerce company, as it seeks to stay on the right side of Beijing, which has been cracking down on tech giants to rein in their growing power and influence.

Tencent (TCEHY) plans to distribute more than $16 billion worth of its stake in JD.com (JD) to its shareholders as a one-time dividend, the Chinese gaming and social media giant said Thursday in a stock exchange filing. The 457 million shares that Tencent (TCEHY) plans to give out represent 86.4% of its stake at JD.com (JD), or 14.7% of JD.com (JD)’s total issued shares.

Currently, Tencent controls 17% of JD.com. After the distribution, its stake will drop to to 2.3%, which means it will no longer be JD.com’s largest shareholder.

JD.com founder Richard Liu Qiangdong, who holds 13.9% of shares, will become the biggest stakeholder, according to the company’s latest annual report. Walmart follows, with a 9.3% stake.

This surprising retreat by Tencent comes at a time when the country’s internet giants are under intense pressure from Beijing.

For the past year, China has increased scrutiny of the tech industry, published detailed rules aimed at tackling unfair competition, slapped companies with massive fines, and demanded that some firms completely overhaul their businesses.

In its filing on Thursday, Tencent said that JD.com has reached a status where it can finance its own growth.

It is, therefore, “an appropriate time” to transfer the majority of the stake to its shareholders, Tencent said.

The move may reduce Tencent’s “dominance” in the market and “is potentially an attempt to shift towards fairer competition, as well as to be more in line with the agenda for China authorities,” said Yeap Jun Rong, market strategist for IG, in a research note on Thursday.

As part of the deal, Tencent President Martin Lau will step down as a director of JD.com, according to the filing.

The two companies will “continue to maintain their mutually beneficial business relationship,” including their ongoing strategic partnership agreement, Tencent and JD.com said in separate statements on Thursday.

Tencent’s stock surged more than 4% in Hong Kong on Thursday, while JD.com’s shares tumbled 7%.