NEWS ANALYSIS : China’s Curbs on News Could Be a Profit-Sharing Move

China’s decision to curb foreign financial news services may be as much an attempt to claim a chunk of a fast-growing business for itself as it is an effort to curtail the flow of free information, analysts said Wednesday.

The move also may be intended partly to choke off market data to unscrupulous and fly-by-night financial operations that have proliferated in the free-market economy here.

Under an edict announced Tuesday, the New China News Agency--the Communist Party’s main propaganda arm--will have the right to distribute all economic news services coming into China. Until now, such services, provided by companies such as Reuters, Dow Jones and Bloomberg, have been sold freely to banks, securities houses and anyone else who had the $1,000-a-month or more that such electronic news services cost.

The edict by China’s State Council, or Cabinet, in essence gives the New China News Agency the right not only to distribute and market the services, but also to check their content for matter that “slanders or jeopardizes the national interests of China.”

That raised the specter of state censorship of economic news, a prospect that bankers, business people and diplomats immediately and roundly condemned--even as they sought to determine exactly how the new edict will be implemented.

On Wednesday, China sought to reassure them by saying it would not hold back real-time information. “We will not restrict freedom to release news,” a New China News Agency official told Reuters. “We are not willing to affect financial markets.”

But Beijing made clear that it may punish distributors of news considered inimical to China’s interests. And at least one government official said Wednesday that the news agency will collect a fee on foreign news that it distributes, buttressing the suspicion that China’s motive is partly financial.

International services providing economic statistics and market commentary, such as Reuters, Telerate and Bloomberg, together have more than 1,000 clients and tens of millions of dollars in sales in China.

Via satellite or dedicated phone lines to computer terminals, the companies deliver live information about global markets, world news, interviews--even cartoons and horoscopes--for $1,000 to $2,000 a month.

News agencies that provide nonfinancial information, such as Reuters and Associated Press, must already route stories through the New China News Agency. But financial services had escaped state regulation--partly because the content was mostly statistical and partly because of China’s need for timely economic information to remain competitive in global markets.

As the financial markets blossom and the agencies add more services, analysts say officials fear they are losing control of the flood of information--and potential profits.

“If the reasons are economic, we can live with it,” one information provider said. “If they’re just trying to extort money from us, we’ll simply pass it on to the end users, which tend to be state institutions, like the central bank.”

Trade Minister Wu Yi said he knew nothing of the edict when Sen. John Glenn (D-Ohio) brought it up at a meeting during his visit to Beijing on Wednesday. That suggests that the action had not been cleared with all ministries.

“He didn’t seem to know about it, but I told him I thought it was heading in the wrong direction,” Glenn said.

China’s hidden target in Tuesday’s edict may well be unlicensed futures traders, or “bucket shops,” that use computer terminals to tap into global markets for illegal, around-the-clock trading. The state has sought to crack down on such underground activity for several years.

The effect on legitimate users remained unclear Wednesday, but many seemed unconcerned.

John Crossman, chief representative in Shanghai for Jardine Fleming Securities, compared the move to last year’s order requiring all financial analyses to be read by the state Security Bureau before its release. It turned out the directive wasn’t aimed at international securities firms but at local, mass-produced “tip sheets” put out by those wanting to manipulate selected stocks.