Investors Barred from Buying Listed Media Shares: Is it Such a Bad Thing?
Next month China is expected to release detailed information concerning how foreign institutional investors will be able to purchase shares of listed Chinese companies. The regulations are seen as a welcome move as China opens its markets to foreign investors while it continues forward with WTO implementation. However, foreign institution investors will still face restrictions on which listed entities they may invest in.
According to the China Securities News, the central government has published a detailed list of those companies that will be off limits to foreign investors. What is of particular note to those in the media business, is that of the small number of media companies actually listed on Chinese bourses, nearly all have been placed on the list barring foreign entities from purchasing their shares.
Media companies listed in the announcement include:
Media China Bittech
Hunan TV & Broadcast Intermediary
CTV Media
Gehua Cable TV
Chengcheng Investment & Culture
This list comes concurrent with the announcement by the Xinhua News Agency that media is now the 4th largest industry in China (see statistics below), supplanting tobacco.
Although it might seem like an odd combination of announcements at first, by providing specific rules for foreign investment in listed media companies, the central government is actually making it easier for foreign investors to avoid legally murky investments in the run-up to full WTO implementation in 2006. At that point, according to the rules of China's WTO accession, investment regulations for foreign and domestic entities must be harmonized.
Gray areas in the investment regulations have caused a large amount of heartache for foreign companies operating in restricted areas in the past (one doesn't need to look back too far to see the vast amounts of capital and resources wasted in the Unicom China-China-Foreign investment scheme) and this lesson has not been lost on policy makers as the media sector opens as well.
The fact of the matter is, China's media sector has not been strictly open to foreign investors (institutional or private) for as long as there has been a media sector in China. By providing clear guidelines in advance of full WTO implementation in 2006, the central government is allowing itself time to complete the merger of radio, film and TV entities into larger groups as well as insuring that foreign companies do not fall unwittingly on the wrong side of the regulatory chopping block.
After all we’ve waited this long, what’s three more years?