Media regulation

How to get around the financial news regulations


David Wolf at the Silicon Hutong blog has a good review of the recently updated regulations for foreign financial news services operating in China: Bloomberg, Thomson Reuters and Dow Jones. In summary:

Aside from their news wires and other news businesses, these companies sell financial information to banks and financial institutions. Large clients of such services have terminals installed in their offices which receive real time feeds of stock and commodity prices and a massive selection of business news.

The state-owned news agency Xinhua also provides such a services. For more than a decade, the foreign financial news providers have been fighting a struggle with Xinhua for the right to do their business in China. This has been rather difficult because Xinhua has also been the regulator of the industry, and it continually tried to make things difficult for its competitors. From David Wolf (emphasis added):

The foreign financial information providers (FFIPs, or "fips"), understandably upset that an ambitious local competitor was going to serve as their regulator, cried foul, and the United States, the European Union, and Canada all protested to the WTO. Thus forced to concede that having the local champion serve as regulator carried the faint smell of protectionism, China agreed in a settlement to have the State Council Information Office (SCIO) serve as regulator.

Interestingly, the settlement also accepted a fairly broad definition of financial information, going beyond just prices and data and including news and other information. But more on that in a minute.

Congratulating themselves on a fairly satisfying and sagely compromise, the FFIPs returned to business.

Until yesterday.

Before heading off for the three-day May Day weekend, the SCIO published the regulation that formalized the agreement. Then, it noted that the FFIPs, while allowed to sell their business and corporate information services in China, would not be permitted to conduct news gathering activities.

Wolf suggests a way that the financial news providers could respond:

Third, remember that the FFIPs have natural allies in China that have helped them before. It is time to call upon those allies again. But that is not enough - you have gone back to that well too often - it is time to get more allies, and that means going public. Stop positioning yourselves as news companies (at least in China) and start making a public effort to demonstrate that you offer a service that is essential to the future of the Chinese nation and to its role as an emerging financial power.

Personally, I think there may be an elegant sidestep that is already in place, thanks to the way business entities are registered in China.

Presumably, Thomson Reuters, Dow Jones and Bloomberg's news gathering operations are registered under a different business license than the one used for the sales and distribution of their financial information services.

All they have to do is keep a legal wall between those two entities. If they make sure news gathering and the sale of financial services are kept on completely separate books, the financial services companies will not be breaking the new rules.

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There are currently 2 Comments for How to get around the financial news regulations.

Comments on How to get around the financial news regulations

Jeremy, it's funny you mention the "Chinese wall" solution. There are three potential issues with that. First, the Chinese government has to believe in the wall in as something more than just a foreign, legalistic artifice. Second, that the legal wall between the entities will function. Third, each FFIPs will have to demonstrate that the wall works by carrying no China news or information gathered by their news gathering organization on information services sold by that side of the business in China.

Anything less, and they are still de facto domestic news services.

'Settlement' results in SCIO as regulator? I assume the WTO et al expect the new regulator to be impartial, objective, fair? Yet this is the same SCIO that ordered one of its subordinate offices to fabricate evidence in order to win a certain media trademark case a few years back? And the same SCIO who told other official agencies (e.g. AIC) to 'bring themselves in line' when the (foreign) legal owner of the trademark raised a stink about the case in the same (foreign) press, the financial part of which the SCIO will now be regulating...

When oh when will the United States, the European Union, Canada and the WTO understand what China is about?

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