Chinese Media Open to Private and Foreign Partners

Historically, China's media industry has been one of its most protected sectors. Control over the dissemination of information has been and remains a critical area in which the government continues to place close oversight. It came as no surprise then that the bilateral WTO accession agreements did not include any provisions on the opening of the media sector to foreign investment.

Still, the Chinese media sector is following the path of some other industries where investors tested the regulatory waters before they were entirely safe. Certain trends are working to make media, one of the last frontiers for foreign investment, more receptive towards investment. The need to cut the losses of state owned enterprises, a category to which all Chinese media entities technically belong, means that state-run media are now required to undertake more fiscal responsibility. Since most state-run publications are losing money and the government is no longer willing to serve as a permanent source of funds, many publications have turned towards private sources of funding. These private interests, with their capital and expertise, have boosted production values and business operations.

This increasingly common arrangement comes with some restrictions. One is that the State must hold controlling shares in any media business infused with private funding. The business model that has so far been used involves private interests paying management fees to government-owned magazines to use their publishing licenses. The private partner may then sell advertising, organize distribution, and assume design responsibilities. The state-owned entity keeps the formal control over the editing responsibilities, but private parties have been known to be heavily involved in the content of publications. Another important restriction is that any mention of politics must be avoided.

Private interests are participating in this scheme because of the possible lucrativeness of what is estimated to be a US$6 billion industry. Since there has traditionally been no involvement by private entities, investors that move now will possess first mover advantages and sidestep oversupply and price war difficulties. And so far, most private interests have invested in the media with a view to recoup quick profits because of the uncertainty over future regulation. Although risky because of shaky legal footing, it appears that publishers will continue to actively look for private and foreign partners to join in opening up the Chinese media market.
* Owen D. Nee and Jingzhou Tao