Vendors Continue To Negotiate With Xinhua

Despite a recent decision by China's Xinhua News Agency not to levy fees on foreign news agencies Dow Jones Markets, Reuters and Bloomberg (IMD, June 2), the vendors still fear that Xinhua, a competitor, will have ultimate control over the distribution and prices of their services. And now that Hong Kong is once again part of China, Xinhua's dictates will likely govern vendors' business there as well.

To address their concerns, Reuters and Dow Jones officials are negotiating with Xinhua and other Chinese government authorities for further changes. The vendors have requested that Xinhua provide clarifications of the remaining elements of the recent plan. Bloomberg did not return calls by press time.

Dow Jones and Reuters have even delayed signing off on the business registrations until these changes are clearly defined. The business forms, required by Xinhua's Foreign Information Administration Center, are part of the People's Republic of China's business approval process.

Xinhua said last year that it planned to begin exacting seven per cent of the gross revenues of the financial information sold by foreign data and news vendors in China (Dealing & Investment Systems, April 9, 1996). The recent reversal follows Xinhua's April announcement that it would disseminate real-time financial information in China via satellite through the newly formed Xinhua Financial Information Consultancy (IMD, April 21).

Reportedly, pressure from Western trade negotiators played a role in the reversal on fees. With China planning to join the World Trade Organization, trade negotiators maintained that Xinhua's state monopoly was a violation of its commitment to liberalize access to its domestic markets.

Even given the reversal, sources say that if the remaining elements of the proposed plan are put into place, foreign news agencies will nonetheless wind up operating in a state-controlled and strictly regulated environment that violates WTO rules regarding free trade in services.

The proposed plan calls for the news agencies to provide Xinhua with extensive customer data, information the agencies deem confidential and proprietary. This includes complete customer lists and a variety of other details, including the types of information each customer receives, how it is being disseminated to them, and what they're being charged for it, according to a Xinhua announcement.

Also, according to the announcement, Xinhua and Chinese legal authorities will take action against foreign news agencies not only if the information they publish is deemed contrary to the country's national interests, but also if it is used by a customer for illicit purposes or in an illegal manner. In such cases, Xinhua and Chinese legal authorities can go so far as to revoke the offending news agency's license and close down its operations.

Industry officials are also concerned that the new market and regulatory structure as currently envisioned discriminates against them in additional ways.

For instance, it is unclear how the new rules will be applied to foreign economic and financial data vendors that are not registered news agencies, such as stock exchanges, one vendor source notes.

In addition, there are approximately 50 Internet service providers in China, and it's unclear how these rules would apply to vendors and economic information coming into the country via the Internet, the source adds.

As to censoring Internet-based economic information, the source speculates Chinese authorities will look to implement some type of IP-blocking mechanism, similar to those implemented by countries such as Germany and Singapore.

On a positive note, the vendor source says that Xinhua has been willing to engage in constructive dialogue with the foreign news agencies to see that the final set of regulations will be implemented in an orderly manner and will not compromise development of China's economic information industry.

Gordon Crovitz, managing director of Dow Jones Markets (Asia Pacific), says, "China has made enormous progress over the past 15 years. We viewed [the new regulatory rules] as an exception to this trend, and that's why we're very glad to see some progress being made. We continue to work with Xinhua to see that the new policies are consistent with international practices and WTO rules."

Many of China's state- and quasi-state owned banks and securities houses are beginning to take advantage of new information technologies. This puts Chinese authorities in a quandary about how to balance the government's desire to control information access against an emerging market's need for openness. Organizations such as the Bank of China "are as sophisticated [in their use of financial IT] as anyone," says Crovitz.

As specified in prior edicts, in order for Xinhua to carry out its surveillance responsibilities, Dow Jones and Reuters are required to gratuitously provide the state news agency the equipment it will need to synchronously monitor the real-time economic information the foreign news agencies transmit.