China’s Crackdown Crosses Western Wires
Important Details: It’s just two years until the Peking Olympics, the centerpiece of China’s coming-out party. Official news out on Sunday reminded that the run-up to that event will be filled with overtures, greetings, warnings and threats. Just as Google, Yahoo!, eBay and other Internet titans have struggled to build businesses while agreeing to unprecedented censorship of their products, traditional news media now have a new fight on their hands.
Censorship in China has been a fact of life for all media. Try buying a foreign print publication, and you see that you can only buy it at a few newsstands, allowing limited access to non-Chinese information sources. And with Internet news censorship, the only access points have been largely subterranean ones, with an exception or two. To build the Chinese market and export economy, China has allowed the inroads of foreign financial wires. Most prominent among them are Reuters and Bloomberg, both of which additionally carry Dow Jone’s content. These wires of course contain lots of needed data, and they contain the supporting news – news that makes sense of the numbers, and news that can be troublesome to an authoritarian government bent on control.
The new rules are far-reaching:
- Foreign economic-news vendors would be required to use Xinhua, China’s monopoly news service, as their sales agent. Xinhua (also known as New China News Agency) will reprise negotiations with vendors that it dropped 10 years ago to extract fees (then 40%). Reports place annual revenue of all foreign-information suppliers at $100 million.
- Vendors are specifically prohibited from selling directly to their current customers, largely Chinese banks and brokerages.
- Xinhua is specifically empowered to revoke the license of anyone found distributing content that “harms China’s national security or honor”, or “disturbs the Chinese economy” or “hurts ethnic feelings.” Financial wire vendors could not include content banned under Chinese laws. Xinhua would have the right to decide what news and information will be released in and can delete anything it deems inappropriate.
- Xinhua would be able to ask vendors to supply information about their methods and technologies, a clear indication that Xinhua’s interest is two-fold: 1) tightening censorship; and 2) taking a more controlling position in the creation and distribution over time, through its profit-making arm. That arm is the China Economic Information Service, a Xinhua subsidiary that seeks commercial opportunities for the agency. The information service is the business partner of Xinhua Finance, a Tokyo-listed news and financial-information company. The Chinese leadership has not minced words about the possibility. Said one high-ranking official, “…it’s truly a rare opportunity. We must grab it firmly.” The final goal is "basic replacement of the competition." At this point, Xinhua overall employs 13,000 people, a bureaucracy moving itself to the market.
The action has been protested both by the European Commission and the White House. It is clearly incremental, but a creep away from the promised increasing openness that many observers have said would accompany China’s transformation from backwater to powerhouse.
The news here is an indication of the great disruption of Internet-delivered news and information, and at the same time the limits of it. Yes, the Internet is remaking politics and business, but the Chinese are taking an anachronistic approach, censoring the web, limiting newsstands and so far largely getting away with it. Could it be that the free-wheeling Internet has met its match in old-fashioned, raw-knuckled state power?
(Don’t worry says "The People’s Daily" — Olympics reporting won’t be affected.)
The free flow of business news, or lack of it, also has profound implications for China’s ability to become a successful, international player.
"This is bad for China," James McGregor told the Wall Street Journal. McGregor was in charge of Dow Jones’ Chinese operations when Xinhua launched its attack a decade ago and now runs an investment and advisory company, JL McGregor & Co. "It doesn’t matter if it’s politically sensitive news or a rumor, it’s information that can move markets. That’s valuable to Chinese traders as well. They need the same information as everybody else.”
In Outsell’s Opinion: Outsell believes that dealing with China is going to be a never-ending series of skirmishes, in business and in news. This skirmish also demonstrates how the two are intertwined.
In a market-driven world, in which capital and technology have increasingly supplanted government, financial reporting is no longer a niche. When the Wall Street Journal reports on Wal-mart’s global moves, when Bloomberg’s terminals flash the latest data on the global textile business, when Reuter’s reporters dig into corruption in Shanghai’s development mania, all these have repercussions for all of us, in the news and information trades, as consumers and as citizens.
News is business, and business is news.
The Chinese announcement is another good checkpoint for us, on checking our conventional wisdoms. It’s one of those things we’ve always believed: that open market and open press go hand in hand. It’s just like we always believed that communism and capitalism were mutually exclusive opposites. But it’s a new world, a world in which Mao Tse-Tung, one of greatest public figures, and killers, in human history, has recently been reduced to a single paragraph in Chinese history books just 20 years after his death. It’s a world in which the planet’s fastest-growing economy thrives, as it prescribes the political thoughts of its citizens, an Orwellian world in which limitless consumerism is now deified and political memory is an inconvenient and irrelevant truth.
This week’s news is just an incremental event. But it’s a reminder that the national and global media on which we depend have long been challenged in getting the news in and out of the world’s largest country, their own employees imprisoned. And it’s a reminder that a whole generation of Chinese are being introduced to only half a world, its business end, a half-education that will play out more dramatically as we approach a new world order.