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China¡¦s free market just a dream
By Wang Dan ¤ý¤¦
Sunday, Aug 15, 2010, Page 8
The massive size of the Chinese market is a fatal attraction
for foreign capital, as every investor dreams of entering the Chinese market.
Unfortunately, for many people, such as media mogul Rupert Murdoch, it remains
nothing but a dream.
Not long ago, Murdoch¡¦s company News Corp announced that it was selling a
controlling stake in three Chinese television channels to China Media Capital
(CMC), a private equity fund formed with government backing. Some analysts say
this might be the crucial first step of the company¡¦s withdrawal from the
Chinese market, a tacit acknowledgement that the group¡¦s efforts to expand into
the Chinese media market in recent years have been in vain.
This failure comes at a cost, as the transaction price of the shares fell far
below the actual value. In other words, Murdoch paid a considerable price for
his misjudgment.
The mistake Murdoch made was his belief that China¡¦s media market was a real
market in which investors can invest, acquire other companies, expand their
presence and earn a profit based on the rules of a market economy. Reality
proved that he was wrong. He misjudged three crucial factors.
First, China¡¦s liberalization is directed by policy concerns, which means that
it is restricted. The control of freedom of expression is the Chinese
government¡¦s most fundamental concern. Total control of opinions is crucial for
the continued rule of the totalitarian government. It is the untouchable
lifeline on which its survival depends and this is something the Chinese regime
is fully aware of.
Consequently, thought control is almost everywhere in China. In the fields of
entertainment, fitness, beauty and other such sectors in which foreign investors
and mass media think they can have a share, the Chinese Communist Party will not
let go if it suspects that it may lose control. The so-called ¡§anti-vulgarity
campaign¡¨ recently launched in China serves as an example. Given this kind of
logic, how could Beijing possibly be expected to allow foreign capital to break
into its media market?
Murdoch¡¦s company had spent a lot of time and energy on his endeavor after
entering China 20 years ago, but he has now been forced to withdraw in
disappointment. This is clear evidence that unless there are changes in the
political environment, it will be impossible to enter the Chinese media market.
Second, even if we put aside political restrictions for now, foreign investors
trying to enter the Chinese media market will encounter strong competition from
local vested interests. The main founders and investors of CMC, which is buying
Murdoch¡¦s three TV channels, are all Chinese media groups with strong financial
investment or cultural media background, such as Shanghai Media Group.
The media sector is very different from the infrastructure or financial sector,
which can be completely dominated by capital, technology and management. As a
kind of cultural industry in itself, the development of the media business is
even further restricted by cultural background, wide contact networks and local
conditions, and these are all aspects that make it difficult for foreign
investors to compete with local media groups.
Third, many foreign investors seem to have misunderstood China¡¦s reform and
liberalization. As they saw China developing capitalist markets, they made the
mistake of thinking they can judge this country using the same standards they
apply to market economies. They failed to see that apart from market
development, other aspects of China¡¦s reform are still very underdeveloped.
Take policy stability for example. There is no guarantee of policy stability
because the systemic foundations are missing. As a result, changes in policy
direction and political atmosphere, as well as personnel adjustments, will have
a significant influence on the media market, a market that is very easily
affected by non-economic factors. The level of uncertainty is highly pronounced
in the media market. I think this is something Murdoch and his group have
experienced.
China is in great need of foreign investment ¡X in other words, money. However,
foreign investors, including investors from Hong Kong and Taiwan that have long
dreamed about the Chinese media market, must understand clearly that power still
outweighs money in today¡¦s China.
This is the greatest difference between the Chinese and Western economies.
Wang Dan is a visiting assistant professor at National Tsing
Hua University¡¦s College of Humanities and Social Sciences.
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