China may loosen media controls

Possible move would bolster IPO-bound groups

BEIJING -- China has set new media guidelines to help the financial development of domestic news and entertainment companies trying to compete with global giants such as News Corp, Time Warner and Universal, The New York Times reported on Monday.

Under guidelines published last week by China's State Council, China's Communist Party leadership "will in the process loosen some of its tight control of these industries," The Times said.

The one-party cabinet's publicity arm, the State Council Information Office, released the guidelines that said state-owned media groups would be reorganized to allow outside financing so that they could "live on their own rather than being attached to government departments as parasites," The Times said.

For years, many Western media companies have been frustrated trying to break into the tightly-controlled Chinese media sector. Now, following recent speeches by President Hu Jintao, in which the Chinese leader promoted the role of the Chinese media in bolstering the nation's image overseas, it seems foreign media players are being invited back to try again -- quietly.

No Chinese media published reports of the new guidelines and the guidelines themselves were not immediately available on the Internet. China currently is observing a week-long national holiday and government offices were closed.

In early September, Wang Taihua, deputy minister of the State Administration of Radio Film and Television, gave a rare interview to flagship state-run broadcaster China Central Television, in which he hinted at top-level government plans for new finance, banking, taxation to support media development.

Further details could emerge later this week in Beijing at the first Global Media Summit. The three-day event, hosted by the state-run Xinhua News Agency, is expected to attract foreign media executives such as News Corp's Rupert Murdoch and the heads of the British Broadcasting Corp. and Google.

News of the guidelines comes on the heels of a recent win for the United States at the World Trade Organization, which said China was in violation of open market rules in the media sector. China is appealing the ruling.

The Times said the new guidelines could allow private and foreign companies to invest in everything from music, film and television to theater, dance and opera productions, although largely through state-owned companies.

The publishing of news would remain under the strict control of the state and the Communist Party, the Times said.

Clarification of the rules will likely be welcomed in the Chinese media sector. The guidelines come barely a week after the proposed merger of and Focus Media, a deal that might have created China's second-largest communications concern, foundered after regulatory misgivings and bureaucratic foot-dragging.

One likely beneficiary of the new guidelines could be the Shanghai Media Group, the second largest state-run news and media conglomerate after China Central Television, Beijing's flagship broadcaster.

SMG, which owns the annual Shanghai International Television and Film Festivals, is reorganizing in preparation for a public stock issue. To get ready, it's splitting into a state-run, non-profit that will control news programming and satellite transmission, and into a profit-driven unit that will control advertising and the production and distribution of entertainment content.

SMG recently got a promise of $1.5 billion in financing over the next five years from The China Development Bank, which separately will give $735 million to build the private equity China Media Capital fund, to be run by SMG chairman Li Ruigang.

SMG has partners in News Corp., Viacom, and The Nielsen Co., The Hollywood Reporter's parent company.

Another likely beneficiary of the guidelines could be Beijing-based Huayi Brothers Media Corp, which is expected to try to raise $91 million on China’s new Growth Enterprises Market by selling 25% of its holdings by year's end.