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Take A Time Out On Foreign Publishing In China

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Nearly every month some non-Chinese company comes to my law firm seeking our help in navigating the legal issues involved in publishing some sort of magazine or website in China. Their initial questions nearly always focus on WFOEs versus Rep. Offices or about bringing on Chinese staff as part owners of their planned company.

Not once have we ever been asked whether it is legal for foreign owned Chinese entities (be it a WFOE or a Representative Office) to own such a business in China. So when one of our China corporate lawyers responds to their technical questions by pointing out that the business will be illegal under Chinese law, they are always taken aback. The more savvy among them ask how “so and so” gets away with it and we usually tell them we do not know the specifics of “so and so,” but here are some of the things we know about how some companies manage to have their magazines published and distributed in China. We always add the warning that most of these methods put the magazine at risk of being “shut down tomorrow.”

Just to be clear, foreigners are prohibited from publishing in China. Chinese law could not be any clearer on this.

AND, Beijing this week closed down the ubiquitous and popular Time Out Beijing Magazine.

In Time Out magazine banned by China’s censors in run up to Olympics, the Times Online blames it on censorship, but I see this as more of a licensing issue, which itself stems from the CCP’s desire/need to censor.

A bit of factual background:

The English-language edition of the monthly magazine that gives foreign residents and visitors the latest lowdown on the coolest bars, the hippest shops and the hottest shows in the Chinese capital has disappeared.

The June issue of Time Out Beijing has been banned from distribution by China’s censors, The Times has learnt. But the decision seems to have been taken not because of any racy or politically incorrect content. Time Out Beijing has fallen victim to the accelerating imposition of restrictions on any aspect of life in the capital deemed to pose a potential threat to a smooth Olympics.

Tom Pattinson, the editor of the magazine, hinted that the timing — just two months before Beijing plays host to the Summer Games — was no coincidence. He told The Times: “The magazine has been impounded while officials look at licensing issues. But these have not changed in the past three and a half years and it is perhaps a strange time to question an issue that has not been a problem before.”

The Chinese government says the shutdown is due to a lack of “a proper license:”

The ostensible reason given by the General Administration of Press and Publications for pulping the June issue was that the magazine lacked a proper licence. But Time Out Beijing has published ever since its launch without completing the proper paperwork and this had never raised eyebrows among the censors who were well aware of one of the most prominent of the tiny number of English-language publications in the capital.

The English edition was at first distributed effectively as an insert to the Chinese-language magazine — which does possess the proper licence. Gaining a publishing licence in a country where all publications are carefully monitored by cultural commissars is a long and tortuous process. For a foreign title, the procedures are doubly difficult and involve publication under the title of a usually defunct local magazine.

The big question is whether this closure is a permanent condition or just an Olympic related one:

A spokesman for Time Out Beijing, now owned by the Hong Kong-listed advertising agency SEEC Media that is very well connected in China, said he could not explain why the June edition had been pulled even before it hit the shelves. “It is not convenient to say,” he said, adding that the magazine hoped to resume publication as soon as possible. Editorial content was already being put together for a possible July edition.

But magazine insiders said that they thought it unlikely that an edition would be available until after the Olympics as nervous censors move to reassert control over all publications before an expected flood of foreign visitors for the Games opening on August 8.
An official at the Press and Publications Administration voiced ignorance of the entire saga in words that bode ill for the future of one of the best-known magazine brands in the Chinese capital. He said: “If there is such a magazine, it wasn’t approved by us in the first place.”

The problem with operating a business illegally in China is that past history is simply not a good indicator of future performance. We know foreign businesses that have operated illegally in China for 15 years without a problem and we know other businesses in the very same industry that have been shut down within six months of beginning operations. And that is the problem with an illegal business: you just never know when the knock on the door is going to come and when it does, saying that you have gotten away with it for x number of years is no defense at all. There is little that can be done when you are on the wrong side of China’s law.

What we do know though, and what we have been all but screaming on this blog ever since we started it is that China’s law enforcement against foreigners is constantly getting stricter and that pace has only accelerated in the last few months:

China is tightening all rules across the board with the approach of the Olympics. It is increasingly difficult to obtain a visa to enter China. Many foreigners are being forced to leave. Security is being stepped up citywide as Beijing tries to ensure that the Games run without a hitch.

Like us, Lost Laowai sees China’s crackdown on visa violations and its crackdown on Time Out as part of the same package of China’s tightening its law enforcement against foreigners, but he makes an excuse where there probably is none:

And again, there’s nothing wrong with the Chinese government tightening control over what has long been a wishy-washy practice of handing out the “most convenient” visa, rather than the “proper” one.

But therein lies the frustrating part in all this. As foreigners we come to China and know nothing of the local practices. We largely come from countries that follow the rule of law to an obsessive ‘t’, and so are eager to step in line and fill out the forms.

But upon arriving here we are faced with a fuzzy collection of rules and regulations that are not so much seen as just “known”. Rules which force us to rely on locals that have experience navigating this confusing and twisted clusterfuck of undocumented legalities that ebb and flow based largely on who you know, rather than what you know.

And before you know it, you’re just as tangled up in the mess as the rest of the country, jumping from relationship after relationship like fast sinking stones in a futile effort to ford a river you had no idea was so cold, deep and murky.

Again, the reality is that Chinese law is clear on foreign publishing: it simply is not permitted and it is a mistake for anyone to rely on “locals” rather for legal interpretation. Just as no Chinese company should rely on some “man in the street” in the United States for interpretations of complicated American laws relating to foreign investment, no foreign company should rely on “some layman or laywomen” in China to interpret its complicated foreign investment laws.

Oh, and FYI, our research has found that Chinese laws do NOT distinguish between publishing in print and publishing online.

Bottom Line: One of the things about China that has always fascinated me is how little the government tends to care about past illegalities of those going legal. We once registered a company with more than five years in China, a state of the art factory, 100+ employees and more than $300 million in annual turnover and the government did not ask us a single question as to its history before we put it on China’s legal grid through registration. So forget the past; if you are operating illegally in China, now is the time to get legal. Tomorrow you may be closed down.

But what do you do if your business is inherently illegal under Chinese law? And let us not forget the most obvious question here, which is how can China continue to justify forbidding foreign voices from becoming a part of its publishing landscape?

13 responses to “Take A Time Out On Foreign Publishing In China”

  1. Strange that That’s Beijing should be taken down but the other That’s titles should stay in business.
    This news comes at the same time as my favourite (and usually NSFW) expat mag The eXile is in the process of being shut down by the Russian government as the result of an ‘editorial audit’.

  2. These days, nobody has a proper permission (kanhao), even the Chinese magazines, as they’re utterly impossible to get, even if your buddy is the director of the local Ministry of Information. They all just get ISSNs and publish through Hong Kong (supposedly).
    Something to remember is that nothing in China is 100% legal or illegal. It’s all a grey area, even if you’ve got all your i’s dotted and t’s crossed.

  3. To publish a magazine in China, you need a publication license (kan hao in Chinese). Kan hao are owned by state-owned publishing companies, ultimately subject to the control of the Ministry of Information.
    The way the legitimate expat-run English language magazines are published is as follows (MUCH easier said than done):
    –Set up an advertising company. I believe this area is now open to WFOEs.
    –Find a Chinese publishing company with a spare kan hao.
    –Enter into an agreement with the Chinese publishing company: the advertising company provides all the editorial and advertising content; the Chinese publishing company takes a chunk of the revenue and prints the magazine with its kan hao.
    –Each issue must be submitted to the publishing company’s censors prior to publication.

  4. It seems that all the slack in the law in China is being taken up at the moment with respect to foreigners: visas, publishing, traffic issues.
    I agree with Dan’s comment that it is time to get legal.
    But I don’t see the current climate regarding legal enforcement and foreigners as being only about ‘rule of law’, or increasing legal compliance.
    I see the recent ‘crackdowns’ as being anticipated, planned, and as an integral part of Chinese governance.
    Westerners commonly percieve the slack in the Chinese legal environment as laxity in the system, equating it with slackness or poor quality. I don’t think so. Although it is true that the Chinese legal system has in essence been built from nothing since 1979, that it is developing fast, and will continue to develop, I believe that all the slack in the system is there for a reason and will remain.
    The key is that if there is slack in the system, the administrators retain discretion. If the need arises, everything can be tightened up, which is precisely what has happened recently, with visas, traffic offences, publishing, etc. The recent changes in the application of policy were as planned as a chess move – they were always a possibility, and if you were surprised, you aren’t thinking enough moves ahead.
    If the administrators were to let go of that slack, they would lose a significant part of their power, and it isn’t going to happen. If laws are applied strictly and to the letter, there is no room for the government to move, and the Chinese government will not back themselves into a corner in that way.
    So, I agree with Dan in that it is much better to be as far towards the legal end of the compliance spectrum as possible. But I do also think that for foreigners and foreign businesses in China, 100% whiter than white compliance is almost impossible, and if there is some management imperative which means slack in the law needs to be taken up, it will be. At that point, 2% non-compliance will be enough.

  5. @FOARP: “That’s Beijing” wasn’t shut down. Apparently the trademark was appropriated by the Chinese publisher for another publication (I am not sure if this was at the expiry of a licensing contract or what), leaving the editorial team to continue business with the same content but under a different title, “The Beijinger”. One assumes their kanhao remains in order. Still, if I was them I’d expect a month or two of confusion during the juicy Olympic advertising period.
    CLB guys: Forgive any abuse of legal terminology.

  6. They’re closed down because they’re taking revenues away from SOE advertising companies who want to clean up during the Olympics and don’t want “Thats” involved. Same old story: Blame the Chinese for the regulations but forget the foreigners would have been well aware of the risk. If you are in such restricted industry in China; do your risk assessment. If you weren’t aware of it you’re stupid. It’s “Thats” problem, not the Governments. They knew they were semi-legal. They got caught out. If your advising on China you should know that.

  7. To clarify:
    I’ve been the GM of the company that has produced that’s Beijing since we launched the title in 2001 (we’re a domestically registered, 100% Chinese-owned enterprise, btw). We also publish three other magazine titles and a book series.
    We have industry-standard, universally accepted agreements with our state-owned publishing partners, so I’d say that Dan your comment above about being “semi-legal” perhaps is more applicable to Time Out’s situation.
    However, like Dan and other astute commentators have mentioned above, we as a local enterprise cannot own a publishing license (nor can foreign enterprises).
    The only entities that can hold publishing licenses are state-owned enterprise publishing houses.
    ALL magazines in China (English, Chinese or Swahili) are either:
    a. imported from overseas under an importation license (rare); or
    b. run fully by state-owned enterprise publishing houses (think China Daily or People’s Daily); or
    c. run by private companies with joint venture or contractual relationships with the license-holding state-owned enterprises.
    Our’s was a contractual relationship. The contract ended last year and for the past 8 months we have been working on a new deal.
    The negotiations on that deal were ended abruptly and unilaterally by our partner at the end of May.
    Sucks for us.
    However we have spent a lot of time and effort in developing relationships across the spectrum of state-owned publishing houses, and therefore have more than one that is willing to cooperate with us in publishing our magazines.
    Hence, we are moving on, sans the “that’s” brand, to do a magazine called “The Beijinger.”
    Look for it next week.
    Mike Wester
    General Manager
    True Run Media

  8. Foreign Businesses In China And Illegality Per Se
    When I would judge mock trials at the University of Washington Law School. One of the things on which I always criticized the lawyers-to-be was for talking like a lawyer. I would ask if they described a guy getting out of a car as “a person descending …

  9. Great post!
    I want to know whether China accepted to publish the writer outside (we know the e-mail address growing)?
    And is there any mainstream publisher in China which specializes in genres of fantasy or YA?
    Very hard to find the right search on Google 0.o

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