The Equilibrium between the Government and the Market: an Analysis of China’s Media Policy after WTO

by Hu Zhengrong, Ph.D Li Jidong, Ph.D candidate
after tracing down the evolution of China’s media policy, this paper analyzes distinctively on the change, the purpose and the efficiency of the media policy after WTO. It is concluded that China’s media policy after WTO is devising a different approach from that before WTO to find the equilibrium between politics and economic values.

Current China’s Media Reform

1. The key problems facing the current China’s media reform
As explicitly addressed in the report and the resolution of the 16th Party Congress and the Third Plenary Session of the Sixteenth Party Central Committee, the reform on current cultural government units (文化事业单位)mainly includes: 1)improving the management system of government units under the guideline of separating politics and government departments.(政事分开)2)maximizing the fundamental role of the market in allocating the resources;3)perfecting the functions of the government in social and public service management (Office of the Central Party,2003). This, in essence, is an institutional innovation in commercializing cultural units. In July, 2003, “Proposal about Trial Reform on Cultural Mechanism issued jointly by the Publicity Department of the Communist Party of China (CPC) Central Committee, the Culture Department, the State Administration of Radio, Film & Television (hereinafter referred to as SARFT), and the State Administration of Press and Publication” (hereinafter referred to as SAPP)(No.21 Paper) was transmitted by the Office of the Central Party and the Office of State Council. Then, accordingly SARFT and SAPP adopted a series of active measures, the focus of which was to divide media industry into public sectors (公益性事业) and business sectors: 1) The system of state ownership will apply to prime news media outlets such as the party-run newspapers, magazines, radio & TV stations, and key publishers. The reform will focus on attracting more investment, transforming mechanisms, vitalizing business and improving the quality of media service. 2) Non-propaganda resources, advertising, printing and distribution will be commercially operated, concentrating on the institutional innovation, the transformation of mechanisms, the opening up to the market and vitalizing economic activities.
In another word, the kernel concept of the reform is to categorize media outlets according to the level of ideology, locating public sectors in ideological area while business sectors into the market. The policy adopted in this reform is, therefore, remarkably different from the previous ones. First, it is an institutional innovation, a systematic restructuring, but not fragmentary reparation. Second, it breaks through the monolithic state planning system, emphasizing instead, the coexistence of the public and business sectors.(公益事业和经营性产业) finally, the reform has exerted its influence into the entire cultural sectors and other government units, laying a good foundation for cross-business media convergence.
However, we are still plagued by many questions. For one thing, it is hard to set up the standard to categorize: ideology is employed in all performance of media, and it is irrational to assume that non-propaganda resources are not liable to ideological problems. At the same time, business operation and commercialization are basic attributes of the media industry; therefore, it is hard to imagine how news propaganda organizations, apparently public sectors, manage to survive the market of economy. With regard to a state-owned media outlet, public service and business management are its internal affairs, and the absence of business recourses will lead to the insufficiency of self-reliance. But if the media earns a living by throwing itself into the competitive market, will its behavior be differentiated from other business undertakings? The standard, therefore, is too simple, self-contradictory, and by no means scientific and applicable.
For another, the question is how to define public sectors: The strenuous effort in putting party-run newspapers and magazines and other political propaganda resources into public sectors implies that the ideological influence of the Central Party is equivalent to that of public-favored undertakings, the result of which, however, is the absence of public service because it lacks public-run media organizations independent from the government and business forces such as BBC in Britain and PSB in America.
Finally, it is about the complete competition. Media policies in nature should encourage competition to safeguard public interests and diverse media products. However, this reform as the previous ones, continually accentuates the power of state-owned media outlets so as to ensure the sustainable political support from the Central Party, thus turning the traditional monopoly to a new one under which the market fails to play its roles and the competition is incomplete.
The crucial part of media reform lies in the alteration of market rules whereas the policy is the agenda of rules set by the government. The policy, in essence, is the output of an institution, that is to say, the outcome of institutional arrangement. The origin of the above problems, therefore, is that the policy-makers have not been emancipated from the concept of state planning economy, which results in the inability to set an institutional agenda under the system of market economy. So, the critical concern of media reform is the transformation of media policy on the ground of institutional innovation.

2. The transformation of public policy and the paradigm shift of media policy
The government plays different roles in public and private sectors under different economic systems. The planning economy, characterized as government-led, turns the whole society into a huge processing factory and therefore, underestimates the distinctive difference between these two areas. But the truth is the government is not only the provider of public goods, but also that of private goods. The economic activities under market economy, on the other side, are market-oriented, seeking for government interference only when the market is inefficient. The fundamental function of the government is to provide the public goods to meet the public requirements, offering quality public goods only when they are trusted to do so.
Admittedly media serves the public, but its economic activities should by no means be led by the government, and even not so simply because of its business attributes. The essence of China’s reform is the transition from planning economy to market economy, which indicates a transformation of its media policy from one system to another. The function of the government will, thereafter shift from a full-scaled interference to a decent role played as policy provider or macro-management.
In developed countries like America and some European countries, the alteration of media policy had undertaken three phases: the paradigm of newly established broadcasting policy (before the World War Two); the paradigm of media policy for public service (1945-1980/90); the current policy paradigm (1980/90 till now). In phase one, media policy served for the purpose of seeking a balance between the government and economic interest groups. In phase two, it concerned more about social and political factors as well as public interests. For example, American government highlighted social obligations of media by adopting stricter public policy to interfere in media operation. In Western Europe, at the same time, the public broadcasting reached its peak.
Starting from the 1980s, with the development of technology, economy and society, the prevalence of neo-liberalism has brought a significant change to media policy environment, the state monopoly of media being shaken and privatization elevated. The policy-makers have endeavored to seek for a new communication policy paradigm, that is, to find a balance among politics, society and economic values. (Cuilenburg and McQuail ,2004)。While in China, the government concerns more about how to balance the party ideology and economic values since its media has just walk out of the shadow of ideological influences, and into the process of commercialization. In fact, since the opening up and reform policy in 1978, Chinese policy-makers have taken persistent efforts in finding out the equilibrium between the two elements. However, the deepening of marketization makes it more complicated and challenging for the government to do so, especially after the entry of WTO when all types of economic interest groups and local political interest groups grow stronger, and the public awareness of democracy is elevated.

The Evolution of China’s Media Policy

The media policy is a kind of public policy, an outcome of institutional arrangement made by the government. The public policy, in essence, an administrative behavior, determines whatever governments choose to do or not to do, whereas an analysis of public policy mainly focuses on the extent, the purpose and the effect of government’s interference into social economy (Dye, 2002:1-3). So, from this aspect, the research on media policy examines problems like the content, the purpose and the effect of government behavior in media industry. As government behavior has been constantly changing, a historical observation on it is conducive to analyzing its purpose and factual effects. Initially, the innovation of media policy took place soon after the reform and opening up policy, however, the substantial one occurred after the entry of WTO, so our research on China’s media policy will be divided into two phases:

1. The transition of media policy before WTO
In spite of the fact that China’s reform has focused on the transformation from centralized planning economy to market economy, the reform before 1983 mainly involved non-state-owned sectors beyond the established institution. For example, contracting output quotas for each farming household, and increasing the capacity of non-state-owned enterprises were heavily advocated at that time. It was not until the 1980s that the reform was identified to be market-oriented, the focus of which was to move from the countryside to the city, involving industry, business, technology and education, etc. The fourteenth Congress of the Central Party in 1992 initiated the objective of socialist market economy, that was, to establish an institution of socialist market economy by the end of the 20th century. (Wu, 2003:44)
Likewise, the significant change of China’s media policy occurred in the mid 1980s, or pre-WTO era, after two landmark documents came into being: one is Paper No.37 of the Central Party (1983), focusing on the acceleration of the capacity development; the other is “Proposal on Strengthening the Administration of the Construction of Radio, Television, Cable Network” (No.82), concentrating on the quality escalation in order to strengthen the entire media industry. No.37 in 1983 stipulated by the Central Party conceptualized the restructuring known as “operation of radio & TV by four-level authorities, and its mingled coverage over four-level regions”, which has formulate the developing structure of regional administration of radio & TV. Accompanied by this, newspapers, magazines and publishing distribution sectors were undergoing some block-segmented planning and structuring. By “four-level operation”, it means to construct regional administration of media outlet by the central and the local authorities of the province, the city and the county. In addition, since 1978 when radio and television stations were permitted to have commercials except tobacco & alcohol, No.37 Paper announced the adoption and implementation of “public work-units, enterprising operation” model in business departments of media outlets, and the government began to accept, allow and then encourage media to engage in commercial promotion and self-reliance distribution.
Since 1983, the number of China media outlets has increased year by year. Take TV stations for example; there were only 52 in 1983, and increased 17.75 times to 923 in 1998. Nevertheless, the drastic capacity development and coverage expansion resulted in a scrawling and fragmented configuration, lowering the efficiency of the allocation and integration of recourses, and unification of overall media strengths. In light of this disorder, starting from 1996 Chinese government set about checking up on the media industry by exercising optimal integration. In 1997, the merging model of “Three Station to One, Ministry and Station to One” was launched. But the restructuring this time is only applied to the joint of radio station, TV station and the cable within the county (or city) —radio & TV station, and then it will further apply to the merger of ministry of radio & TV and radio &TV stations.
Based on this, a new institutional reform known as “turning four-level to two-level”, was initiated in No. 82 Paper in 1999, focusing on facilitating the merge of local cables and TV stations (at the level of city or province). In the meantime, it suggested the separation TV station and cables, followed by the separation of production and broadcasting, the separation of information reporting and political reporting, and also independent management of channels. Conglomerates of radio & TV were then set up at the level of provinces, autonomous regions, and municipal cities. At the same time, a regional administrative construction of newspaper groups and publishing groups was initiated, which marked entering a new era of conglomeration. Not surprisingly, this bureaucratic-led convergence is different from that in North America, where mergers conducted by the market, or “the invisible hand”. In another word, the convergence of Chinese media is nothing but a government-led restructuring, leaving the structure of political economy untouched. (Hu,2003)。
To sum up, media policy before WTO was characterized by strong color of planned economy, under which the scale and scope of media outlets were decided directly by the government rather than optimally integrated by the competitive market. Furthermore, the way to construct the regional conglomerates by uniting the administrative and operational forces justified the government to become a main force in media economic activities. The implication is also clear about the government’s intention to run the media under the system of conventional institution, a unique way to operate the media without shaking the root of ideological monopoly of the party. Above all, the media policy in this period managed to find a balance between ideological influence and business operation inside administrative work-units. By doing so, the competitive strength was gathered under the guidance of the government.

2. The transition of media policy after WTO
On November 10th, 2001 China officially claimed the entry into WTO, which suggested that the globalization of China’s economy had advanced a big step. It also meant that media policy-makers must not only respect the fundamental rules of WTO (transparency, equality and market entry, etc.), but face the reality of ever-changed domestic politics and economy after more than 20 years of increasing development, and the same of the external environment caused by the alteration of international political and economic forces in the age of globalization. (It is best manifested by considerable scale, accumulation of capitals in media industry, and deliberate shrinking of government and transformation of its function, etc.)
In addition, since the sixteenth Party Congress and the Third Plenary of Sixteenth Part Central Committee, Chinese government has determined to adopt market economy in reforming government work-units including media industry, and that was, starting from 2003, to launch a thorough reform on cultural sectors under market economy, thereby providing a brand-new reference for China media policy-makers. The same changes took place in media policy entailed in two typical documents: one is that, in August 2001, Paper No. 17“On the Strengthening of the Reform of Press, Publishing, Radio, Film and TV Industry” was jointly issued by the Publicity Department of the Central Party, the State Administration of Radio, Film & Television, and the State Administration of Press and Publication. The other is that, in 2003, Papers No. 21 advocated to deepen the institutional reform on cultural industry, followed by ” facilitating industrialization of radio, film & TV” and “implementing institutional reform on the press publishing” promulgated by SARFT and SAPP.
Paper No.17 was seen as an important document to deepen the media reform globally, and also a government resolution responding to WTO. It mainly contained: 1) Being capital and business oriented, and constructing cross-media and cross-region conglomerates to break through the conventional structure governed by different level of authorities. 2) Concentrating on structural adjustments, and as in media industry undergoing full-scaled structural adjustments of the organization, the business, the products, the market, the human resources, the knowledge and the capital. 3) Breaking the ice of capitalization, media conglomerates are allowed to collect capitals within the press, publishing, radio & film and TV system by exercising financing, bank loans, and share holding. Under the circumstance of state-share-dominance stocking, the reform of joint stock on radio & TV transmission network, the production of TV dramas, and the distribution sectors of books were allowed to absorb foreign capitals as well as domestic non-state-owned funding. In addition, the operational capitals could go into the stock exchange market, and the loosening of market entry would allow more and more international and domestic capitals to enter into Chinese market.
Several changes can been seen in this document: first, the function of the government has changed, that is, from a market player to a policy and regulation maker and supervisor; media outlets have shifted their status from affiliated organization to market players, becoming independent judicial bodies, and enjoying relative autonomy of economic activities such as capital management and structural adjustment. Second, the government further undermines the interference into media economic activities, rather, put more emphasis on the integration of capitals and business, and lowering the market entry.
In 2003, Papers No. 21 advocated to deepen the institutional reform on cultural industry, followed by “on Facilitating Industrialization of Radio, Film and TV” and “Implementation of Institutional Reform on News Publishing” promulgated by SARFT, and SAPP, which marked that the reform on China’s media policy had entered a revolutionary stage. First, two sectors known as public undertakings and operational business are separated according to ideological attributes, to be more specific, enterprising recourses like social service, entertainment and publishing of special newspapers and magazines are split from established public system, then to be restructured in accordance to modern ownership and enterprising system, separating ownership from enterprising management, therefore, promoting the regional or cross-regional convergence.
Second, to capitalize the business resources in all respects, allowing business bodies of all types of ownership play a part in media operation with the exception of news propaganda. By doing so, China media stepped into the process of capitalization.
Finally, “Regulation on Administration of Publishing Market” officially implemented in 2003 admitted for the first time the ownership of the distribution of newspapers and magazines by non-state-owned enterprises. In July, the State Administration of Press and Publication brought to stage a new regulation, exercising the administration of party-run and locally owned newspapers and magazines. Measures are taken to separate the administration and operation, abolish mandatory allocation, and bring a halt to city or county-run newspapers. This is well known as “introducing life or death mechanism into China newspaper industry”, which is still characterized as an administrative allocation but not market-leveraged. The promising part is, however, the possibility of going bankruptcy of state-owned media gives an impetus to the development of capitalization and effective integration of resources.
We can clearly see above the big change of the policy adjustment this time: 1) there is a distinctive division about the scope and extent of the government interference. Public sectors belong to ideological propagation, led by the government whereas business sectors should be more adaptive to the market, and the government should further deregulate its economic activities. 2) By shifting the monopoly of all economic activities to the concentration of providing public goods and macroeconomic management, the government has established a new concept about the production and distribution system of media products and service. In another word, the production and distribution of media products and service, not necessarily controlled by the government, can be achieved by different means both in public and private sectors. By learning this, the government began to put the production, distribution, and allocation of media goods in hands of market and the public.

3. The purpose and effect analysis of media policy after WTO
The most evident purpose of policy-makers is to facilitate the commercial process responding to the pressure caused by the entry of WTO and globalization. No.17 Paper intended to push planning public media firms into the market, hoping to build a state-owned media empire to combat the international media giants; No.21 Paper forged the reform further by adopting more rules of market economy, expecting to improve the market competitiveness of business sectors. In fact, the underlying denotation lies in: 1) consolidating the leading role of the party by strengthening its ideological control of media. Looking at the previous reforms, guided by the ideology of “Deng Xiaoping Thoughts” and “Three Represents of Jiang Zeming”, the primary concern was how to consolidate its leadership by emphasizing the mouthpiece role played by media. No.17 Paper accentuated that media conglomerates, radio & TV, and film groups in particular, is under the supervision of the Central Party Committee. And it is an independent judicial body in public sectors but not that in business sectors. The reform of cultural system after No.21 Paper is again implemented in prerequisite of securing right opinion direction. Nevertheless, the difference demonstrated in this reform is to innovate the approaches of ideological influence adopted by the Central Party, hoping to justify it into the state ideology. So, media business can only be self-managed under the condition of maintaining the leading position of the Party. As cited by Xu Guangchun, the head of the SARFT, “on one hand, we manage to maintain the media function of mouth and throat of the party, consolidate party administer of media, party administer of cadres, and correct direction of public opinions. On the other hand, we need to fasten the pace of economic reform of radio, film and TV industry” (Xu, 2003).
2) Developing state-owned mainstream media to obtain the continual political support from the Party. Because state-owned media, especially mainstream ones play an important role in securing the society and maintaining governance, so being in supportive of it has been a consistent endeavor made by China’s media policy-makers. From the capacity development of regional administration in 1983 to the capacity decline and quality development of No.82, the reform was conducted within the state-owned system, barring up other social capitals. No.17 makes it accessible to internal funds, domestic non-state-owned funds and foreign funds, but only under the condition of internal system or state control of stocks. In 2003, some relevant Papers presented the core resources such as news propagation to the state-owned media, demonstrating that even under competitive market, it is still important to sustain the leading role played by the state-owned media. The same held true with the institutional reform on trial media outlets starting from 2003, undertaking an internal separation between public and business sectors. In another word, the media was structured by one government entity and two judicial bodies (public and business), serving both for the public and the market. Under such circumstances, the mainstream media protected by the state controlled the most advantageous societal resources, leaving non-state-owned media, and marginal media (such as western media) incapable to survive.
3) Meeting the requirements of public interests are the responsibilities of the media, and also the utmost purpose of why media policy is formulated. There is no exception for Chinese government, in this case, to serve the purpose of meeting ever increasing cultural and material demands desired by the citizens. It is repeatedly emphasized that the media is the mouthpiece of the party, the government and the people, and it serves the interests of the people because it is the people who become final consumers of media products and service.
4) Quickening the pace of commercialization by applying market mechanism to the development of media convergence. As emphasized above, commercialization is a prevailing trend adopted by international media industry. In fact, the supreme objective of China reform is to construct and perfect the system of socialist market economy. Since the entry into WTO, with the increasing commercialization of China media, the media policy will continue to employ market as the benchmark in the implementation of the media reform, and also highlight the fundamental role played by the market in allocating the resources.
In fact, the media policy is a government behavior handling the new problems emerged in the ever-changing media and social environment. Since the reform and opening up, especially after the entry into WTO, China’s media industry and media environment has become most complicated whereas policy-making process is still restricted to some high-leveled decision-making shaped in planning economy, lacking necessary democracy and the complexity grows even worse in its implementation.
First, the history of the economic development of New China indicates that China did not set up the centralized planning economy system like former Soviet Union. Or rather, Mao’s “big leap” and Cultural Revolution had destroyed this system. But the fragmented authorities advocated by Mao were developed, and Deng xiaoping, then proposed the system of regional fragmented administration on the basis of it, forming the federal financial model with Chinese characteristics (Jeffrey, WOO and Yang, 2000). The result of this system was the expansion and consolidation of local interest conglomerates, and therefore formed diversified economic drives. With the trend of global economy and deepening of China reform, particularly after the China’s entry into WTO in 2001, trans-national corporations crowded into China market, which have flourished the pluralism of different interest groups driving forth China’s economic reform. Except the central political interest groups, there are those of local authorities, domestic economy, intellectual interests and trans-national interests, the competition among which has made it more complicated to implement the policy. In one hand, interests group will curb the implementation and intend to bend policy to its own advantage, which, to some extent, will increase the cost of the implementation. On the other hand, seeing the fact that some political forces take advantage of the imperfect law system in China, and neglect policies and institutions, interests group will put painstaking efforts in lobbying the politics into a conspiracy of obtaining profits beyond policy constraints.
Second, strongly affected by planning economy, the decision-making turns to be high-leveled central decision that is not formulated on the consensus by social organizations, especially media organizations. Consequently, the monolithic intention of upper authority impedes the implementation of the policy, causing the alteration driven by economic forces. For example, No. 82 intended to construct media groups at the level of the state and the province, however, No.17 rectified it in the rules and regulations of the implementation upon the strong requests of local authorities and media outlets. The amendment said, the localities like cities with considerable financial power are allowed to construct media group as long as they completely transmit radio & TV programs of the central and provincial media outlets. Here, “considerable financial power” referred to 80 billion GNP, 5 million long-term residents by 2000, and a strong comprehensive power of radio & TV management. The mandatory policy will inevitably result in such phenomenon known as “central policy, local authority”, and the transient feature let local authorities and media operators stand aside, waiting. And these have led to the neglecting of the principle, refusing to carry out the orders, not stopping when forbidden, seeking versatility and manipulating the policy in the implementation. They tend to carry out the policy if it is in favor of them, otherwise do not. Thus appears the soft-power phenomenon that created by Milder.
Finally, the multi-dimensioned purposes of policy-making also make it complicated to implement the policy. The consistent confrontations between ideological strengthening and operational autonomy of state-owned media, between upholding the party’s interests and people’s interests, and between the leading position of state-owned mainstream media and adjusting roles played by market mechanism, make the authorities and media at all levels stick into a dilemma, earning a living by adopting market mechanism while speaking in favor of the Central Party. This has caused dual standards in the implementation of central policies: in theory, media should implement the central policy, serving the propaganda purpose, but in practice, it serves its own interests.
In addition, from the perspective of its obligation, media should serve the public; however, when considering media’s own interests, it is subjected to some privileged class. In essence, when the regulation and its implementation are forged, the drive to maximize the media’s self-interest constantly undermines people’s interest. This can be manifested through the coverage of SARS in early time, and of some bribery cases committed by media personnel.


Since the entry into WTO, China’s media policy has undertaken an enormous change responding to the pressure imposed by internal and external forces and above all, from the government itself. The impetus came from the central government, other political interest groups, economic interest groups and trans-national media conglomerates. In fact, the current concerns about China’s media policy should focus more on the political and economic forces, or government and business rather than state-society and public-private. In another word, the prime question facing China’s media policy is how to defend the leading status of the Central Party while facilitating the development of media economy, and therefore, the equilibrium needs to be found between the politics and economic values.
Apparently, in the long-term future, the government will develop a media aircraft carrier, and facilitate the promotion of the model known as “one body, two wheels to run” in radio & TV and newspaper industry(Zhao,2003). That is, ideological influences and business operation are the two things set up in mainstream media outlets such as radio & TV stations and the party-run newspaper agencies, whereas minor media outlets are mercilessly thrown into the market. This will lead to the configuration of dual-monopoly of politics and commercial media entities.
Nevertheless, the constant combat between politics and economic forces will constitute a scenario that political forces embrace economic ones, and capitals play increasingly important role in both political and economic activities, and consequently propel the revolutionary transition of media institution. But still, a problem worth being worried is that for China’s political forces, the absence of brand-new ideological direction and attraction will leave a space for capitals and its provoked value system to erode the public interests and value system that have already been quite vulnerable.
In the past twenty-year reform, different interest groups in China have gradually grown stronger, the private capitals, in particular, has developed a considerable scale. In addition, the democratic awareness of Chinese citizens has constantly elevated in the process of commercialization, which will inevitably facilitate the alteration in the model of joint media production and distribution.
What is more, the ownership, allocation of resources and supervision involved in the distribution of media products and service will be put in hands of the market and the public, and therefore direct the media policy to be more market-based and publicized.
Of course, the innovation of media policy depends largely on the transition of political and economic institutions. Since Hu and Wen Government came to power, more strength are put on the executive functions of the party, which intends to turn a revolutionary party into an executive one. The leadership vows to run the office according to the law, and as well justify its executive right, which has shown the constant transformation of government functions. In the meanwhile, the ever-deepening economic reform has established concept of market-oriented economic institution, which urges the policy-makers to find the equilibrium among the politics, the economy and the society.


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Presented at the 14th AMIC Annual Conference
“Media and Society in Asia: Transformations and Transitions”
Beijing, People’s Republic of China
18 – 21 July 2005

Hu Zhengrong, Ph.D
Professor of Communication
Director, the National Centre for Radio & TV Studies
Executive Dean, Graduate School
Communication University of China

Li Jidong, Ph.D candidate
Communication University of China