China bans foreign financial news operations [FT]
China raised the spectre of renewed international trade friction over market access for foreign financial information providers as the government said such businesses must not engage in news gathering in China.
The surprise ban on this business area is seen by industry executives as backtracking on an agreement China reached with the US, the EU and Canada in November last year on allowing companies like Bloomberg, Dow Jones and Thomson Reuters to distribute information to financial and corporate clients.
The November deal adopted a loose definition of financial information, including news rather than limiting such information to data such as stock market indices and exchange rates.
It was reached after the US, the EU and Canada lodged a complaint against China at the World Trade Organisation earlier last year over Beijing’s move to make Xinhua, its official news agency and a competitor for the foreign providers in the financial information business, its de facto regulator.
In regulations published on the cabinet’s website on Thursday, the government said foreign financial information providers would be allowed to set up businesses in China and would be regulated by the State Council Information Office. But the rules also said: “foreign financial information providers set up in China ... must not undertake news gathering activities".
The industry had seen the memorandum of understanding signed late last year as a victory of advocates of opening over protectionism.
But on Thursday, people close to the situation said they had the impression that forces intending to protect Xinhua had intervened in the last minute. “There will have to be communication and clarification,” one source said.
Industry executives praised the rules in general as a breakthrough giving foreign players a clear legally-defined role for the first time.
“Thomson Reuters has developed an excellent relationship with SCIO over many years and looks forward to working with them on the successful implementation of the new measures to ensure that financial markets in China are as well informed as their counterparts outside China,” said Henry Manisty, global head of government and regulatory affairs at Thomson Reuters.
Dow Jones and Bloomberg were not immediately available for comment.
China has required foreign news agencies to distribute to media clients only through Xinhua for more than 50 years. This will not change, and the foreign players do not challenge this arrangement for their news agency business which helps the Chinese government ensure news does not reach the public uncensored.
The companies’ financial information services business had been relatively unrestricted until 2006, when China took the controversial step of ordering distribution through an agent wholly-owned by Xinhua.