Logic and Dynamics of Gradual Reform on China's Press Regulation: A Reflection on Corporatization Transformation and Delisting Mechanism HAN Xiaoning1 Abstract Corporatization Transformation and Delisting Mechanism are two major areas in China's press institutional reform. The similarities of these two routes are that, they both contribute to enhance the market mechanism in press industry, and will result in reduction of government financial burden in future. But their development and implementation are different. Reform on Corporatization is more popular and progressing rapidly, with a low political risk and high profitable prediction. Meanwhile, reform on Delisting Mechanism, which is regarded as a preliminary reform on license system and harm to vested interests groups flourished under the traditional ideology, develops relatively slowly and is gradually split into two relatively independent parts, Evaluation and then Delisting. This paper tries to analysis the legal basis, enacting process and implementation of recent press reform in China, to conclude the logic and trends of China’s gradual press reform. Different performances between the two routes of reform reflect the reality and obstacles of China’s press reform. Concerns on economic efficiency became essential catalytic factors in specific policy-making and reform. In current domestic politics frameworks, economic-oriented press reform will continue struggling with established political concerns, and hardly make a significant breakthrough at political level. But at economic level, China’s press industry has come out of a solid pace of reform. Keywords Gradual Reform, China Media Regulation, Press Regulation, Corporatization Transformation, Delisting Mechanism. 1 School of Journalism and Communication, Renmin University of China, Beijing, 100872. hanxiaoning@ruc.edu.cn. The paper was drafted while the author did research as visiting scholar in Center for Global Communication Study at University of Pennsylvania, PA10104 USA, in June 2012. Related research began while the author worked as special research fellow at the Media Development Research Institute of GAPP since 2007. I. Context of Related Reform For a long time, total amount of newspaper and magazines are strict restraint by administrative departments. Even governmental institutes can hardly apply a license to open a new newspaper or magazine. In contrast, transfer of license is relatively easier, on a high cost. Publishing resource became a kind of monopolized resource. On the other hand, state-owned press entities are losing market competition, in front of private new media companies. Thus, Reforms on Delisting Mechanism and Corporatization have been hot zones of policy-making in press area of China. Reform on Delisting Mechanism is a specific departmental reform in press area, launched in 2005, which is supposed to resolve the dilemma of monopolized publishing resources, to delist the poorest press through an evaluation process. At beginning, it was also regarded as a stretch to current political framework and is expected to evoke the reform of the license system. Corporatization Transformation is a part of national cultural reforms, launched in 2009, which encourages or forces state-owned entities transform into companies. Legal circumstance of China’s press industry In recent decades, legal proposals about media were seldom seen to be proposed to National People’s Congress of China (NPC), as well as specific media laws. Only few cases can be found, such as Film Promotional Law in 2011. Most regulatory documents are drafted and release by related administrative departments, based on few regulations by the State Council. In newspaper, magazine and publishing area, nearly all important regulations are based on the Regulations on Publication Administration, which was first released in 2002 and revised in 2011 by the State Council. Because of lack of legislation, there are many indistinct areas in legal practice, and many specific administrative measures rely on various patch type of regulatory documents. Meanwhile, powers of administrative departments are largely enhanced. Administrative departments in media area, such as the General Administration of Press and Publication (GAPP) and the State Administration of Radio Film and Television (SARFT), are authorized by the State Council to draft and release regulatory documents, and participate or affect other specific policy-making. Every five years, the State Council submits to NPC the Five-year Plan for National Economic and Social Development. Recent ten to five years, some administrative departments also release their own five-year plan about theirs administrative sections, before the national plans are released. Actually, State Council adopts suggestions and plans from those administrative departments during drafting national plans, and sometimes turns will of administrative departments into will of nation. As in cultural area, Central Commission of Communist Party of China (CPC) also has essential influence and occasionally releases important documents to setup principles and directs media policy-making and reform. Out of those five-year plans and CPC’s documents, most policy-making trends and administrative directions can be predicted. Basic logic of future press policy-making From the latest central-level programmatic documents, the 12th Five-Year Plan ①in Mar 2011 and CPC Central Committee Decision Concerning Deepening Cultural Structural Reform② in Oct 2011, and previous related documents, basic logic of next five-years policy-making and reform in press area could be summarized. Firstly, political security is still a basic line. Insisting on Marxism and the socialist orientation in cultural area will not be changed. Even state owned newspapers and magazines are allowed to transform into companies and allowed outsides capital to invest, the state should be the holding shareholder of them. Secondly, administrative methods will still play an essential role than legislation. Administration methods were mentioned in both documents everywhere; on the contrary, legislation was seldom mentioned. Thirdly, license system will continue serving as a threshold to control press market. Rarely, the CPC decision made a detailed statement on license regulation, “Insist on Host and Organizer system, implementation of who is in charge who is responsible and the principle of regional administration, strict implementation of the market entry and delisting policy on cultural capital, cultural companies and cultural products”. Fourthly, reduce financial burden, promote state owned media entities to increase competitiveness in market mechanisms. Most changes will happen in state owned newspapers, magazines, publishing houses and cultural performance institutes. Only keep the public interest entities as state owned institutes and require non-public interest entities gradually to transform into companies. This way also reduces the burden of government financial budget. Party newspapers, Party magazines, TV stations and radio stations will not be transformed into companies in next five years, in consideration of political security. II. Dynamics of Delisting Mechanism Reform Delisting Mechanism Reform is one of the most complicated and toughest reforms in China’s press area. In China’s traditional media system, nearly all of the newspapers and magazines are state owned, and have some kind of political status. If not because of political mistakes, once newspapers and magazines achieved license, there is not sufficient legal approaches to cancel or close down them. Traditional license system, as a political security valve, cannot meet the growing demand of economy. The actual situation of the social and economic development calls on administrators to launch reforms. Of course, any reform on this area is supposed to be sensitive and harmful to conservative vested interests groups. Origin of Delisting Mechanism Reform GAPP is the national administrative department on press area, under the State Council. GAPP takes in charge of final approval of license applications, controls the total amount of press institutes, and directs to adjust the publishing industrial structure. Provincial and local Press and Publication Bureaus are under leadership of GAPP and local government, take in charge of local legal enforcement and preliminary approval of license applications. License system is an essential section of China’s current press regulation system. In past decades, license system sets up a threshold to protect state owned inefficient media from market competition excludes private and foreign ownership of traditional media and secures the political security. But with advent of internet and digital media, tradition media are gradually losing domination position of public opinions. And most of competitive new media are owned by private capital. Huge amount of state owned traditional media have no ability to fulfill original task of influencing public opinions, but become more and more burden to state and local financial budget. Thus, new application for opening newspaper and magazine has been nearly frozen since 2003. Year 2002 2003 2004 2005 2006 2007 2008 Amount of Newspapers 2137 2119 1922 1931 1938 1938 1943 Amount of Magazines N/A N/A 9490 9468 9468 9468 9549 Table1: Amounts of newspapers in China, 2002-2008.③ Reform on publishing license system is actually a part of reform on cultural market entry and delisting policy, and intertwined with reform on Corporatization Transformation. In policy-makers consideration, ideally first, newly opened newspapers and magazines should be in form of company. Second, existing inefficient newspapers and magazines should be terminated to make room for new ones. Third, based on the principle of regional administration, local provincial administrative departments take in charge of regional administration, to terminate and approve publishing license in their own jurisdiction, to ease the pressure on national administrative department. This consideration has resulted in current practices in license administration. In year of 2003, a campaign of clean-up against inefficient Party newspapers and periodicals was launched by the CPC Central Committee and State Council ④ , to reduce the burden of local governments and rural peasants, to stop the apportioned distribution of party newspapers. In that campaign, a large number of local newspapers, especially the county-level party newspaper and periodicals were closed down or merged into higher level entities. Since then, a license application can hopefully be approved only under some implicit conditions that either it meets some political or public interest purposes, or there are some licenses were terminated in its province. New license applications are hard to be approved. For qualified investors, another way to achieve a license is to transfer existing license through a process of modification of registration, which based on mutual negotiations and informal transactions. License becomes great threshold and generates great cost to investors. Transactions around the license system have negative impact on industry but GAPP had no efficient measures to solve it in current political framework. What GAPP can choose is to work out a delisting mechanism to terminate some existing license and then approve new ones. That is the reason why the market entry and delisting mechanism reform was called on. Legal basis of market entry and delisting mechanism In terms of legislation, the Constitution of the People's Republic of China, amended in 1982, Article 35 provides: "Citizens of the People's Republic of China enjoy freedom of speech, publication, association, freedom of procession and of demonstration." But the highest legislative body, the National People's Congress and its Standing Committee never enact specific laws to guarantee citizens’ rights to found or run newspaper freely. Therefore, promulgated by the State Council and implemented on February 1, 2002, "Regulations on Publication Administration" became the highest specific regulations in China’s press area. Based on the "Regulations on Publication Administration" (2002), GAPP drafted and released two departmental regulations, “Regulations on newspaper publication” and “Regulations on periodical publication”, in 2005, for the first time tried to clear the requirements of license application and the situations result in license termination. For example, a new application of a newspaper or a newspaper publishing entity should meets following requirements: having a qualified “Host” entity and a qualified “Organizer” who take responsible on the newspaper; having more than 300 thousands RMB as registered capital; having professional organization and qualified professional editorial personnel comply with national regulations; having fixed workplace in the same region with its “Host” entity; having a legal representative or person in charge with China nationality; etc.. In addition, GAPP also issued a number of normative documents to classify supplemental requirements or procedure of license application and modification, such as “Implementation Approaches for Newspaper Publishing Evaluation and Demonstration System"⑤, which requires any new application or modification should submit a feasibility report, to demonstrate the feasibility of new registration or modification by the applicant. GAPP takes in charge of organizing experts to evaluate the feasibility report, as well as application forms and other support documents, to determine the result of the application. Although the applicant meets the objective requirements, the subjective factors involved in the evaluation procession will still result in a failure application. The main challenge in reform is there is lack of workable legal methods to terminate licenses of those inefficient newspaper and magazines. In the latest clean-up campaign operated in 2003, when the two later released departmental regulations haven’t been released, a number of newspapers and magazines were closed down according to an administrative order, in form of a voluntary deregistration by their Host entities. Now, in accordance with the spirit of rule of law, the government doesn’t want to launch a campaign style movement to close down newspaper and magazines again, which should not be the reform direction. So, policy-makers in GAPP are trying to find legal basis and enact new regulations to establish a delisting mechanism. Approaches to terminate a license legally In the “Regulations on Publication Administration” (2002), there are four approaches to terminate a license. First, based on Article 12, “Host” entity or “Organizer” entity can deregister the license in voluntary basis. Second, based on Article 18, publishers can deregister the license in voluntary basis. Third, based on Article 19, if a newspaper or periodical stop publishing over 90 days, its license will be canceled by GAPP. Fourth, based on Article 26, Article 27, Article 56, Article 60, Article 61, if a publisher is involved in content violations, such as threaten nation security or pornographic contents, or involved in abuse licenses, such as renting out licenses, its license will be canceled by GAPP. So, GAPP cannot terminate a license just because of its inefficient or poor management. In order to resolve this situation, the “Regulations on Newspaper Publication Administration” and “Regulations on Periodical Publication Administration” (2005) provide GAPP the fifth approach. If a newspaper or periodical does not meet other departmental regulations about application approval or publication quality, fail to pass regular inspection, its license should be suspended or canceled by GAPP. The key point is “other departmental regulations about publication quality”, which leaves a legal portal for following policy making, although the “other departmental regulations” had not been enacted then. In addition, the two departmental regulations mentioned for the first time that GAPP takes in charge of “establishing and improving the comprehensive publication quality evaluation system, annual inspection system and delisting mechanism” of newspapers and magazines. Questions, principles and enacting process in policy making of delisting mechanism December 2006, GAPP released the "11th Five-Year Development Plan for Press Publication Industry”, which referred to "reform publication administrative system and administrative style… research to develop the evaluation standards and administrative methods of market entry and delisting mechanism”. Establishment of delisting mechanism was enlisted into government work lists for the first time. Around evaluation of “publication quality”, GAPP started to establish delisting mechanism. Newspaper and Periodical Bureau of GAPP setup a research project about delisting mechanism and appointed the Media Development Research Institute (MDRI) of GAPP to do that study, in 2007. During the preliminary research on delisting mechanism by MDRI, several meetings between researchers, officials and publishers were hold. Some essential questions were raised and discussed. Firstly, how to evaluate a newspaper or magazine? What kind of indicators should be used? Should indicator selection be based on economic orientation or content quality orientation? Secondly, how to deal with newspapers or magazines in different provinces of different economic development level? Thirdly, how to deal with newspapers or magazines in different categories, such as Party newspaper and professional newspaper? Fourthly, if a newspaper or magazine is evaluated to be unqualified and its license should be canceled, how to deal with the subsequent steps, such as cancellation of business registration, employees dismissed or placement, and asset disposal? Through long term discussion, several principles reached agreement between policy-makers and representatives of the press, such as a) The principle of categorized administration. Newspapers or magazines will be evaluated separately in several categories. Newspapers will be categorized into Party newspaper, metropolis newspaper, and professional newspaper, etc. Magazines will be categorized into academic periodicals and non-academic periodicals, etc. Party newspaper and academic periodicals will not be evaluated in preliminary phase. b) The principle of regionalized administration. Newspapers or magazines will be evaluated separately in each province. Evaluations will be conducted by each provincial administrative department. c) Subsequent disposal measures reference to measures in previous state-owned enterprise reform. So, one of the key tasks of establishing delisting mechanism turned to be establishing a workable comprehensive publication quality evaluation indicators system. In 2007, Newspapers and magazines market delisting evaluation index system (Proposal) was drafted by MDRI of GAPP and submitted to GAPP⑥. Since then, reform on delisting mechanism paced into trial phase. In September 2008, Liaoning and Hebei Province were appointed to be trial provinces to test the implement of evaluation, delisting and subsequence disposal⑦. In April 2010, an experience sharing sessions of newspaper and magazine delisting mechanism was hold in Liaoning Province. Liaoning Provincial Press Publication Bureaus accomplished trial task of delisting mechanism, 12 newspapers and magazines were delisted, 242 employees and 50 million RMB debts involved. Meanwhile, 6 newspapers and magazines were delisted in another trial region, Hebei province. Other provinces didn’t actually implement delisting process till 2012. In December 2010, GAPP delivered to all the provincial Press Publication Bureaus, the "Comprehensive Evaluation Approaches on Newspaper and magazine Publication Quality (Trial)"; according to which, Beijing Municipal Press Publication Bureau started evaluation process inside its administrative region in early 2011. National recognition of Reform on Delisting Mechanism Delisting mechanism finally was adopted into the higher regulation by the State Council in March 2011. The State Council released revision of the “Regulations on Publication Administration” (2011), which provides more legal basis for delisting mechanism. New Article 50 refers to GAPP takes in charge of “implementation of evaluation and delisting administration, and supervision of content quality”. New Article 52 refers to GAPP takes in charge of “enacting the comprehensive evaluation methods, and implementation of comprehensive evaluation in categories”. This revision adopted GAPP’s departmental regulations into a higher level regulation and classified the specific operation approach. “Comprehensive evaluation” took place of previous “publication quality evaluation”, which implied that the evaluation indicators will not only include content quality indicators, but also include more comprehensive indicators, such as economic and management indicators. Design of the Evaluation Index According to the "Comprehensive Evaluation Approaches on Newspaper and magazine Publication Quality (Trial)"(2011), the comprehensive evaluation index system consists of four sections of indicators, a) infrastructure indicators, b) environmental resource indicators, c) publishing capacity indicators and d) management capacity indicators. Infrastructure indicators examine the basic publishing conditions, institutional mechanisms and facilities necessary for publishing. Environmental resources indicators examine the policy environment, economic environment, market environment, publishing resources, human resources, capital resources and other resources. Publishing capacity indicators examine the circulation scale, content quality, text editorial quality, digital publication, internationalization and other performances. Management capacity indicators examine the operation results, such as advertising business revenue, circulation revenue. Data resources include annual inspection data collection from GAPP, self-reported data from publisher, market monitoring data from third-party, and subjective scores from experts. Data of last three years will be weighted calculated. The last few of those being evaluated will be terminated. Specific rates of elimination can be varied in different provinces. Separation of the Evaluation from the implementation of Delisting From2007 to end of 2010, the evaluation index system and implement approaches have experienced a great number of arguments and negotiations from regional Press Publication Bureaus and representatives of the press, and finally reached a basic agreement and then was released. Because of the complicated evaluation process and the difficulty to collect required data, most provincial Press Publication Bureaus are still in data collection phase. Before the Comprehensive Evaluation Approaches (2011) was released, many provincial Press Publication Bureaus hadn’t collected enough data to do the evaluation. Many provincial Press Publication Bureaus also received pressure from the local press. No one in any province wants to face the possibility of failure in an evaluation and then be closed down. Originally, the Evaluation process is a primary section of Delisting Mechanism. But implementation of evaluation and delisting together encounters great resistance from the press. Policy makers decided to separate the Evaluation process from Delisting process. Reform on Delisting Mechanism is gradually changed into two relative independent parts. GAPP hopes to establish the regular Evaluation system at first, to fill in the administrative blank. Implementation of Delisting process will be left to next stage to solve. It is hard to say that delisting mechanism has been actually established, although most documents have been drafted and released, from2007 to 2012. Reform on entry mechanism is always mentioned together with reform on delisting mechanism in regulatory documents and government work plans. The current situation is if no market delisting mechanism implements, there won’t be a new market entry mechanism. Whether or not there is a possibility of loosening entry threshold of license, remains to be a question. III. Different Performance of Reform on Corporatization Different from Reform on Delisting Mechanism, Reform on Corporatization Transformation is more popular in various areas and develops quickly. September 26th 2009, the State Council issued the "Cultural Industry Promotion Plan", which refers to reduce the access threshold of market, and actively absorb the social capital and foreign capital into the policy-allowed areas of cultural industry to participate in the joint-stock reform of state-owned cultural companies, promote the common development of public ownership as the mainstay pattern and diverse forms of ownership of cultural industries; foster leading cultural companies. The core of cultural industry reform is property right system reform. Since then, some leading newspaper and magazine groups began to plan their way to absorb external funding. In April 2011, the CPC Central Committee and the State Council jointly issued an important regulatory document, “Opinions on deepening the structural reform of the non-political newspaper and magazine publishing entities”. Some of the most noteworthy contents are that "evening newspapers, metropolis newspapers and financial newspapers are different from the general non-political newspapers; they are playing an important role in guiding public opinion. In accordance with the requirements of building larger and stronger mainstream media, central and provincial evening newspapers, metropolis newspapers and financial newspapers can be transformed into companies under admission.”⑧ Although the Party newspapers, as political newspapers definitely, are not allowed to transform into companies, but most profitable metropolis and evening newspapers are parts of Party newspaper groups. It means that the Party newspaper groups are the biggest beneficiaries of this reform. It gives the party newspaper groups a flexible capital operation space. For example, one of leading provincial Party newspaper groups, Dazhong News Group in Shandong Province, whose flagship Dazhong Daily is a CCP Provincial Committee newspaper, launched reform plan about its owned local metropolis newspaper on May 19th 2011, just in a month after the policy was released. That plan transformed its local newspaper Peninsula Metropolis Daily into a joint-stock limited corporation. From April 2011 to June 2012, nationwide Corporatization Transformation of non-political newspapers and magazines progressed rapidly. Provincial administrative departments showed unusual enthusiasm on this route of reform, in contrast to the reform on Delisting Mechanism. Corporatization means a state owned institute should complete a complicated transformation steps, such as audit of assets, placement of workers, social insurance payment, labor contracts re-sign, company registration and other affairs. In relatively shorter period, many state owned institutes completed these procedure an transformed into companies. More entities are in process of corporatization. Report Date Province Corporatization Transformation Progress June 2012 Jiangxi 23 entities completed in first run. 47 entities completed in second run June 2012 Yunnan 23 entities completed in first run. 6 entities in process May 2012 Tibet 1 company established May 2012 Henan 39 entities in process May 2012 Anhui The first run in process Mar 2012 Hainan Plan to launch Mar 2012 Guangdong 76 entities in process Mar 2012 Hebei 49 entities in process Mar 2012 Shanxi 95 entities in process Feb 2012 Hubei 145 entities in process Feb 2012 Guizhou Plan to launch Feb 2012 Shanghai Plan to launch Dec 2011 Nationwide 1600 entities completed company register Nov 2011 Shaanxi 400 entities completed Table2: Major progress of Corporatization Transformation, Nov 2011-Jun 2012⑨ IV. Conclusions Corporatization Transformation and Delisting Mechanism are two major areas in China's press institutional reform. These two routes are both aim to enhance the market mechanism in press industry, and to reduce government financial burden. But their development and implementation are different. As long as the highest personnel authority and core news business are still controlled by government through stock holding, Reform on Corporatization are considered as political safe, high profitable and within the controllable tracks. Ownership restrictions are constantly being relaxed. Non-political press is encouraged to adopt corporate management techniques to its administration, and even to be restructured into listed companies on stock market, as long as the majority of the shares should be state-controlled. New regulations allow new investors to enter some well-operated newspapers and magazines, which can improve these newspapers management and profitability. Reforms in this route will not have adverse effects to any vested interests groups, so that they are popular, advancing smoothly and rapidly. Meanwhile, on another route, Reform on Delisting Mechanism, which would generate new possibility of political breakthrough, advances relatively slowly and has to split into two parts, Evaluation and Delisting, because of vested interests groups and practical difficulties. Concerns on economic efficiency are obvious essential catalytic factors in recent policy-making and reform. If one reform route can bring economy benefit to every party, it will be welcomed and accepted smoothly. If one reform route can bring harm to vested interests groups or has political risk, it will be resisted and advance hardly. Traditional ideology-oriented administration and legislative ideas still remain, although in decline. Economic-oriented press reform will continue struggling with established political concerns, and hardly make a significant breakthrough at political level without national political reform. Reform on Delisting Mechanism is launched by GAPP and adopted by the State Council. It shows the great efforts of government to administrate via legal approaches or rule of law. However, establishing a workable media regulation system to resolve historical problems is quite hard for an administrative department in current domestic politics frameworks. Cautious and careful are required everywhere. Reform on Corporatization is launched by the State Council, as a part of national cultural reform, and implemented by GAPP. Its progress is more like a nationwide campaign; without careful legislation. The important reality is that China's media system has historically been a part of the China’s political system. Within the existing political framework, China’s media reform can only have a gradual process at political level, such as license system, content direction and surveillance. Without a real political reform, China's media system is not expected to have a sudden and dramatic change by itself. But at economic level, China’s press industry has come out of a solid pace of reform. ① The 12th Five-Year Plan for National Economic and Social Development of PRC (2011-2015), reviewed and approved by the 4th Plenary Session of the 11th National People's Congress, Mar 2011. ② CPC Central Committee Decision Concerning Deepening Cultural Structural Reform, reviewed and approved by the 6th Plenum of the 17th CPC Central Committee, Oct 2011. ③ Data is collected from GAPP official website. ④ The notice on the further administration of Party and government departmental newspapers and magazines’ indiscriminate spread and abuse of authority to issue, to reduce the local and the peasants' burden, by the CPC Central Committee General Office and State Council General Office”, was released on July 15 2003. ⑤ Implementation Approaches of Newspaper Publishing Evaluation and Demonstration System, was released by GAPP, implemented on Aug 1 2004. (http://www.gapp.gov.cn/cms/html/21/399/200601/447554.html) ⑥ FENG Yuming, 3 Steps for Newspaper Delisting, China New Paper Industry, 2009, No.4.(in Chinese ) ⑦ SU Yongtong, Shut Down Newspapers, South Weekend, June 9 2001.(in Chinese) ⑧ In original content of Opinions on deepening the structural reform of the non-political newspaper and magazine publishing entities, the detailed qualified entities are, “central-level metropolis and financial newspapers and magazines; provincial, sub-provincial and provincial capitals’ evening newspapers, metropolis and financial newspapers and magazines”. ⑨ Data is based on Reports from provinces on GAPP official website. (http://www.gapp.gov.cn/cms/html/21/515/List-3.html)