China Said to Explore Taking Stakes in Some News Websites

  • Stakes would be in exchange for providing `news' licenses
  • Government would hold board seats, could block content

China is considering taking board seats and stakes of at least 1 percent in operators of some Internet portals and mobile apps in exchange for granting news licenses, according to people familiar with the plan.

The government would issue the licenses in exchange for stock and a board seat, according to the people, who asked to not be identified because the details haven’t been made public. Government representatives could monitor and block content distributed by Internet providers, although they wouldn’t be involved in other day-to-day business decisions, according to the people.

The proposal would give authorities the ability to block news from reaching the Web and coincides with a broad government clampdown on information distributed online. The move could affect operators of major Internet portals such as Tencent Holdings Ltd. and NetEase Inc. along with mobile apps that provide current affairs and news on a daily basis.

News portals in China have been working in a regulatory gray area. They’re not authorized to provide original content and aren’t allowed to hire reporters or editors, however, some outlets have recently distributed investigative stories related to official corruption.

The government has been consulting with online news providers for the project since late last year, the people said, as part of a broader plan to amend the country’s online information law. The amended draft of the regulation is currently seeking public opinions on the official Website of the Cyberspace Administration of China. The draft didn’t mention anything about the share exchange project.

There was no immediate reply to faxes seeking comment from the Cyberspace Administration as well as the State Administration of Press, Publication, Radio, Film and Television. The Wall Street Journal first reported on discussions about possible government stakes in Internet companies. Representatives of Tencent and Netease didn’t immediately respond to e-mailed requests for comment.

Licenses would be required for providers of “current affairs news”, which means all news and commentary related to politics, economics, military, foreign affairs and other social issues, according to the draft of the regulation. A license would also be required to reprint news stories or commentary via portals or mobile applications, it said.

The government may tap some state-owned enterprises that have experience with the cultural industry to hold the shares, or it may establish a new asset management firm to control the shares, the people said.

Under the pilot program, the government representative and shareholders will not receive dividend returns or any other form of bonus and will not interfere in the companies’ business decisions outside of control over content distribution, according to the people.

— With assistance by Nick Wadhams

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