Marx and Markets. Money and Media.

Question: What are the choices for a state-controlled news agency that wants to make some money while at the same time ensuring its stories toe the government line? It's a tough situation. And it is the predicament of China's Xinhua news agency.

Answer: Play to your strengths. Set yourself up as both regulator and competitor. Take a cut of the earnings of foreign information providers.

    

So that's what Xinhua did this week. Here's my report. And Xinhua's move has caused a bit of a diplomatic furore with the European Commission and the United States jostling to voice their concern about the overt bid to monitor all news and information sold by foreign news agencies in China.

Directly in the line of fire are the financial news services: Reuters and Bloomberg.

My colleague Dan Sabbagh has added some detail to the Xinhua move.

Xinhua's chief made patently clear in a speech earlier this year that his agency was determined to learn from Reuters, copy Reuters and replace Reuters in the Chinese market. (I'm afraid the speech is in Chinese.) His aim is to oust every Reuters and Bloomberg terminal from the desk of every banker, broker and trader in China and offer them a Xinhua alternative (to be created). Because, after all, the big bucks are in selling information to the markets.

The new regulations are carefully worded. No mention of taking a cut but lots of stress on the need to filter information entering China to prevent any undermining of national security. No one at Reuters or Bloomberg is confused by Xinhua's goal. After all, Xinhua tried exactly this 10 years ago but basically had to abandon the attempt amid international pressure just as China was seeking accession to the World Trade Organisation. It found a face-saving solution that allowed the agencies to keep the revenues they had earned from providing financial information and that enabled China's banks to take part in world markets on a level playing field with their international competitors.

Here's a link to a thoroughly informed book -- "One Billion Customers: Crucial Lessons from the Front Lines of Doing Business in China" by James Mcgregor -- that includes a chapter on the previous saga.

This time the process may be easier for Xinhua. After all its president, Mr Tian Congming, is a close associate of the most powerful man in China -- President and Communist Party chief Hu Jintao.

It isn't just about the money, of course. It's a question of control, of ensuring that information deemed possibly harmful to the state -- or to the people -- does not make its way past China's censors.

But it's also a perfect example of the frequent collisions between Marx and the markets.    An instant when the Communist Party's iron grip on politics collides with the imperatives of free markets.

Leave aside the question of the rights and wrongs of a Sintax on foreign agencies, let's also leave aside questions about freedom of the press and censorship. From a purely Chinese perspective, would the Chinese people be best served by preventing the foreign news agencies from oiling the wheels of the very markets on which Beijing is counting to finance efficiently the country's march out of poverty and the overseas expansion of its leading firms?

Perhaps Tony Blair will be asking these questions of Chinese Premier Wen Jiabao when the Chinese leader calls in on Downing Street this week.

Comments

[Christoph]

Interesting info on the background of this move!

This might not be of great importance here, but I still like to mention :). The political organization of the communist states can absolutely not be derived from the writings of Marx. It stems from what Lenin and others thought they can read out of Marx predictions of coming class struggle. Marx himself mainly tried to analyse how capitalism works. He did not set out the foundations of a communist state. Just as a sidenote.