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Friday, March 02, 2007

Chinese media-intel front seeks capital from U.S. markets

The issue of China’s still largely government-owned companies participating in U.S. markets is about to hit the fan, again.

Earlier, the U.S. turned down the acquisition of Unocal, a relatively small American-owned oil company operating in some crucial areas of Southeast Asia, when a takeover was threatened by a Chinese 70-percent government oil company. China National Offshore Oil Corp.
(CNOOC) withdrew its offer for Unocal in the face of a Chevron offer at a lower price after a U.S. government agency, which vets foreign ownership for security purposes, frowned on the acquisition.

But the issue is coming back with a vengeance with the proposal of Xinhua, China’s combination news agency and espionage organization, to dip into the U.S. market to raise $371 million for its financial news subsidiary.

The Chinese media group, which operates major broadcast, print and Internet outlets as well as its own advertising agency, said it plans to use money raised on Nasdaq to pay off debts and make new acquisitions.

Xinhua isn’t the first time a government intelligence organization has dabbled in commerce. The U.S. Central Intelligence Agency (CIA) and other European and Asian spy organizations have been known the set up commercial fronts for their espionage activities around the world, some of them even successful commercial undertakings. But none of them ever blurred the lines between government ownership, espionage, propaganda and commercial media undertakings, as has Xinhua.

Indeed, Xinhua has often acted directly as a branch of Beijing’s efforts to stamp out dissidence through control of the media. In 2003, for example, Xinhua organized the Association of China Xinhua Bookstores to consolidate its 80 percent control of book distribution in the country through its more than 3,000 local Xinhua bookstores. The new company came directly under China’s State Administration of the Press and Publication and Ministry of Civil Affairs, People’s Republic of China, which also controls most police activities.
There has been widespread criticism in the U.S. and Europe of IT companies, including Google and Microsoft, for having provided Beijing with their products as tools in assisting repression of critics on the Internet. The proposal for a Xinhua IPO in the U.S. market could now be interpreted by human rights activists as indirect funding in repressive activities and possibly espionage. The latter possibility exists because Xinhua has represented the Chinese government in places and at times when official representation was not possible for whatever reason. For example, during the transfer of the British Colony of Hong Kong back to the Mainland government, the representative British authorities in Hong Kong worked out details with the local Xinhua chief.

"These outlets reach an estimated 210 million potential television viewers, a potential listening audience of 33 million people and the readers of leading magazines and newspapers,” Xinhua Finance Media said in its regulatory filing for permission to launch the IPO.

The media group, which acknowledges “close ties” to the Xinhua News Agency, generally considered the principal official voice of the Beijing regime, said in its regulatory filing that it hoped to sell 23.1 million American depositary shares priced between $12 and $14 each.

east-asia intel.com

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