The World: China cracks down on foreign media ownership

Broadcasters and publishers face increased restrictions on their businesses as the state rolls back reforms.

If 2004 raised hopes among the many foreign broadcasters - such as the BBC, Time Warner and Sony - pressing for access to China's vast market of 400 million television sets, recent events will have proved a bitter disappointment. Reforms in China's media sector last year were as good as reversed earlier this month when several Chinese ministries announced that no further licences for foreign satellite channels would be issued.

Alongside the ban on new licences, the ministries announced a tightening of controls over the 31 foreign satellite broadcasters that currently hold licences to broadcast in China, and a ban on new licences to import newspapers, magazines, books, electronic publications, audiovisual products and children's cartoons.

However, the change in policy has caused little surprise among China's media and advertising executives. The strictly regulated media has been subject to heavy censorship all along, they say, despite apparent liberalisation.

The most recent announcement simply adds to the challenges foreign broadcasters and publishers face.

JWT China's North-East Asia director and chief executive, Tom Doctoroff, says: "Westerners are under the impression that there has been some loosening of restrictions, but this is not true."

The reasons behind the apparent "one step forward, two steps back" approach by the state regulator are less clear. Some industry executives believe the appointment of the conservative-leaning Wang Taihua, a former schoolteacher, as a director of the State Administration of Radio, Film and Television in December last year is behind the new restrictions. Others see it as the result of political jostling within the administration over the issue of reform. Doctoroff believes recent protests over corruption in several provinces have prompted the reassertion of government control over popular culture.

But most in the industry believe the Chinese government is not concerned simply with social control. Liberalisation also challenges its tight grip on advertising revenue. In a market in which every domestic broadcaster is state-owned, and where the state funds programming with one hand while drawing advertising revenue back with the other, the government's reluctance to liberalise the market comes as little surprise.

"The authorities have been enjoying a substantial increase in revenue each year. To give a stake in that away for it to be consumed offshore isn't in their interest," the MindShare Asia-Pacific managing partner, Simon Woodward, says.

Add restricted landing rights, government censorship, limited use of English in the country as a whole (which means programme content faces the added cost of dubbing into Mandarin), and the hurdles the foreign media face in building a business in China become formidable.

Foreign broadcasters face a long haul when it comes to China. The most successful in gaining landing rights and building TV channel brands in China so far has been News Corp, through its Hong Kong-based arm, Star TV. Its Xing Kong and Phoenix brands are limited to broadcasting to the relatively small southern province of Guangdong, which, historically, has had more relaxed rules on broadcast, with a large number of satellite dishes receiving Hong Kong TV signals for many years.

"We don't see the latest regulations as having a direct impact on our operations," the Star TV vice-president of corporate affairs and publicity, Jannie Poon, says. "We don't have any plans to launch new channels in the market and will continue to focus on our successful operations there."

The only other foreign broadcaster to have made significant in-roads in China is Viacom, the owner of CBS, Nickelodeon and MTV. Other broadcasters, including CNN and BBC Worldwide, are permitted to broadcast in hotels and residential compounds owned by foreigners, and have joint ventures with Chinese state-run stations. But such deals are also heavily risk-laden, as Viacom's current situation illustrates.

Viacom announced a joint venture with Shanghai Media Group in March 2004 to produce children's TV. The deal offers Viacom the opportunity to get involved in producing TV for youngsters in China's largest city and is the first of its kind since China opened TV production to foreign investment.

But despite the fact that programming began airing on 1 May to 3.5 million TV households on SMG's Oriental Children's Channel, the Viacom deal is yet to receive final government approval. Sources predict Viacom may be the last to make such a deal for a while.

Print media may fare better under the new legislation. "I honestly see no impact on our business whatsoever," the Fortune China chairman and editor-in-chief,Tom Gorman, says.

"The current direction in policy reflects the concern of the central authorities about maintaining strict control of media and cultural channels as part of maintaining social order and stability in the face of unprecedented challenges on the domestic front. Implementation of policies will change over time, waxing and waning in terms of openness and control, but I would not expect a wholesale relaxation any time soon."

As a result, foreign media owners are advised to keep a watching brief.

"It's a huge market, and growing fast, and Chinese comp-anies need more investment," a source says. "The Chinese government is very sensitive over ideology, and that means that foreign companies have to be patient, continue co-operating with the authorities to locate the best interests of both sides and develop good relations." China has always been, after all, a long-term investment.