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Investors' Concerns Mount Over China's New Restrictions on Foreign Media


Foreign investors and media companies are awaiting word on if or how China plans to enforce a set of restrictions it announced earlier this month on the foreign media. The restrictions are widely viewed as an attempt by the government to keep control of the country's growing, lucrative media market. Analysts say the rules highlight the paradox of China's attempts to open its markets while at the same time seeking to retain control of them.

The set of vague rules announced by China's government news service, Xinhua, on September 10 give the agency control over what foreign news wires may publish in the country. Xinhua has given itself the power to cut out politically sensitive news and other material deemed taboo.

However, observers say the measure is motivated more by business than by politics.

As part of the restrictions, Xinhua also reserved the sole right to distribute the foreign agencies' products in China.

The financial news market in China is estimated to be worth 100 million dollars and growing. At the same time, officials at Xinhua have complained that foreign news services, including Reuters, Dow Jones and Bloomberg, dominate the Chinese market - providing business news directly to financial institutions.

Andy Browne, a reporter for the Wall Street Journal newspaper in Beijing who for years has followed Xinhua's attempts to secure its place in the market, says the agency is trying to build its control over agencies such as Reuters and Bloomberg by playing on the fact that they are selling news the government regards as dangerous and subversive. Furthermore, he says that by controlling the delivery of the agencies' products, Xinhua puts itself in a position to poach their know-how.

"They'll get an up-close look at the product.," Browne said. "They'll get a look at the management processes, the marketing processes, the sales processes. And they've said, the president of Xinhua has said, that it's his goal to build a news organization that can compete with both Reuters and Bloomberg. So this fits right into the strategy that Xinhua has of turning itself into a global financial news organization."

A former senior writer at Xinhua, who asked that his name not be revealed, says Xinhua knows it cannot compete with foreign news agencies unless it starts behaving less like a propaganda mechanism for the Communist Party and more like a professional news organization.

"Xinhua would have to compete with international wire services like AP and Reuters. That means its reporters must write more professionally, more truthfully, more timely," he said.

Media advocates say for that to happen, China is going to have to allow greater press freedoms - a concession the Communist leadership does not appear ready to make.

International investors widely view the regulations as a miscalculation by Xinhua and the Chinese government - one that could damage confidence among foreign investors.

Mike Dardzinski, an attorney in Beijing who represents foreign investors in China, including media and entertainment companies, says the rules represent a conflict of interest and are at odds with China's emerging role in the international economy.

"One of the big problems here is that Xinhua is acting - and the Chinese government is allowing them to act - both as a regulator of the information marketplace and a competitor in that same marketplace," he said. "And that's just not consistent with international standards with respect to the independent operation of government oversight and the development of a healthy economic marketplace."

The American Chamber of Commerce in China issued a statement voicing its members' concern over Xinhua's new regulations. It urged the Chinese government to suspend implementation of the measures and check whether they are in line with China's obligations under the World Trade Organization.

It also noted that the new regulations contradict an earlier government pledge to allow foreign business news providers to sell directly to Chinese financial institutions.

Neither Xinhua nor the Chinese government has issued any directives on how the regulations will be enforced. Some media and business experts say the vagueness of Xinhua's notice this month and its failure to announce an implementation plan may mean the government has a chance to reexamine what could turn out to be a damaging decision.

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