Eye on China: Seeking truth a dangerous game

It's been a shocking few weeks for China's international reputation, especially in terms of freedom of information.

Two prominent journalists, Ching Cheong of the Straits Times and Zhang Yan of the New York Times, have been jailed for spying (in Zhang's case nominally for fraud, but everyone knows that that is a cover).

The Chinese still have a reflex impulse for identifying foreign journalists as spies, simply because they sniff around for information. Even my Chinese friends call me a spy sometimes, and I can tell they are only half joking.

What many still don't understand is that journalists (make that Western journalists) don't use that information for private gain. The information we acquire is put out there in the public arena.

The Chinese fear of releasing information is possibly tied to the violence that information has triggered in recent history - namely, the rumours and accusations that people made against each other when China was going through one of its regular purges.

The solution should be to ensure that information is accurate, not suppress it altogether. But such fine distinctions are still made only with difficulty in China.

The case of Ching Cheong is especially ironic, given that the man is Chinese and known as a passionate patriot. One of the most shocking aspects of the case is that after he was arrested in Guangdong, authorities took several weeks to tell his wife what had happened to him.

It's interesting that both journalists worked for Western publications.

Within China, there are signs that local journalists are not evolving in the same way as we have in the West. The urge to position oneself as a broker often appears too strong in Chinese culture.

A Western journalist would be delighted to take some previously unknown information and publish it as a scoop, earning the respect of editors and peers. In China, businessmen have told me that many Chinese journalists position themselves as middlemen.

Through their research journalists identify profitable business opportunities and put investors and investees in touch with each other, and get a cut of any transaction that takes place. This is surely profitable for the journalist, but it hardly serves the public's need for honest, accurate information.

The way the Chinese Government is muzzling journalists is symptomatic of its control obsessions.

When foreigners come to China, they are able to assess how bad much Chinese information is, and provide their own. This permits them to challenge the Government's monopoly on information - one might also say the Government's monopoly on truth.

This is why the Government has such an ambiguous attitude to the foreign presence - however many billions of dollars in investment it brings.

In what appears to be an increasing trend of shutting out foreign influence, the authorities recently declared that they would not issue any new securities licences (for dealing shares in the stock market), which is widely interpreted as an effort to keep foreign companies out.

One foreign broker active in China told me that whenever things were going badly in the Chinese stock market, foreign investors' money was welcome as a way of shoring up the index. But as soon as the index started going up, the Western influence began to be resented, and protectionist sentiments resurfaced.

This attitude is all the more absurd given that of all areas of economic activity, financial markets are the most international in nature. This has generally brought great benefits, since money can flow to wherever it's needed most - to China and other parts of Asia for example, should domestic economies be unable to generate sufficient funds.

All the more surprising is that most Chinese securities companies are in Shanghai, supposedly China's most international city. How Shanghai is ever going to make a grab for Hong Kong's crown as Asia's pre-eminent capital-raising centre, when it keeps shutting out foreigners, is a tough question for the Chinese Government to answer.

I would estimate that Western businessmen are being kept out because they make no bones about complaining about corrupt and unprofessional practices in the Chinese markets (and Western finance professionals do set the standard).

One might have thought that China's entry to the World Trade Organisation would have ensured that an internationalisation of the Chinese economy would be irreversible. In fact, this is not the case. When China joined the WTO, it agreed to a staggered market opening by 2007. This did not represent a complete opening, however.

So while foreign commercial banks will be allowed to take local currency deposit from next year, the rate of their branch openings will still depend on government approval. Similarly in the securities industry, foreign companies have been allowed minority stakes in Chinese securities companies.

But any further liberalisation after January 1 next year is completely at the discretion of the Chinese Government. The WTO provided much-needed impetus for the more backward elements in China to raise their standards and meet foreign competition on level terms. Which raises a troubling question: What's going to push them now that the WTO effect has passed?