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Within this context, the power of the market has been increasing in relative importance to older political imperatives for Chinese media Hu, Chinese media have undergone a two-stage capitalisation process: the period of marketization from to , where the state decreased financial support and increased competition, and secondly the waves of conglomeration from to , where the government attempted to restructure media industry through media conglomeration and rampant promulgation of media policies Hu, Seen from a transnational and transcultural political economic perspective, the national-centric reorganisation of the Chinese communication system since the early s according to market logic, constitutes an integral part of the global restructuring of communication systems under the neo-liberal logic of capitalist development and the formation of a truly global communication system Zhao, Globalisation has myriad expressions in different media sectors and thus is far from a monolithic process as it unfolds across Chinese media landscapes.

The state still retains strict controls over licensing and ownership of news production, broadcasting and basic telecommunication services and operates gatekeeping over who is allowed to enter and participate in these markets. This media regulation landscape resonates with the fact that although Chinese media governance has seen the transformation to a decentralised mode of governance that incorporates an increasing range of actors other than the state, globalisation is uneven and its effect is felt differently across different media sectors.

As Hafez demonstrates international news reporting is the least globalised sector while film and entertainment is the most globalised.


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We can observe a similar pattern in China. At a deeper level, it has been animated by a multifaceted neoliberal political project and economic globalisation Curtin, , Culturally speaking, the Chinese internet, argues Guobin Yang , is a fitting metaphor for a China caught between national anxieties and global aspirations as the propagation and popularization of the internet in China gives birth to unique localised culture and experience. With stringent censorship mechanisms in place, boundary crossing and transgressing on the Chinese internet constitute the actual experience of average internet users in China Yang, As a result, internet users have grown increasingly adept at using creative expressions Lugg, ; Meng, and adopting various technical skills such as virtual private networks VPN to circumvent official censorship.

Chinese internet companies, on the other hand, are also adept at capitalising on elements of Western culture to advance their own commercial interests. Based on 75, votes, seven same-sex couples were selected winners from the competition and awarded prizes of a weeklong wedding and honeymoon package to get married in California Tso, Although less ink has been spilled on the dynamics between internet development and the global financescape in the Chinese context, elsewhere critical media scholars have clearly drawn clearly a linkage between capital and new media technologies.

For example, Carlota Perez argues that historically, financial capital has always animated technical changes from an initial financial frenzy to the formation of a possible crash, to a wider dissemination and distribution of the technology to the society Perez, Through historical examinations of how media corporations develop in conjunction with larger dynamics of capitalism, Scott Fitzgerald argues that what is historically significant recently is the extension of a unified and ubiquitous capitalist basis to the field of communications Close harmonies between capital and internet prevail when looking back at the commercial development of the Chinese internet.

For example, publicly-listed Chinese internet companies were swamped in the dot com bubble in the 90s. Sina and China. The opening price of China. This episode of valuation up-and-downs of Chinese publicly traded internet companies shows how the global financial market is closely intertwined with internet businesses through overseas listing. All these studies call for a close examination into how global finance networks and capital simultaneously fuel and limit the development of the commercial internet in China.

The following analysis systematically examines the role of investment capital, financial networks and actors in the globalisation of nine dominant Chinese internet companies. Elsewhere and in China, since the late s, the internet has been governed as a for profit commercial sphere Murphy, In fact, tracing the founding history of Chinese internet companies, one can easily find the imprints of Silicon Valley tech expertise and foreign capital jump-starting the growth of these companies. This global flow of capital and tech knowhow was crucial for the founding of Sohu. Netease also drew heavily on financial backing from Softbank, News Corp.

As these Chinese internet companies flourish and eye shares of global market, they are also thirsty for more capital to finance their growth and consolidate market dominance. As Table 1 chronicles, after establishing their bases domestically, all nine Chinese internet companies sought public listing on the stock exchange. Initial public offering is a key event in the process of corporate financialisation, which at its most basic level aims to provide vast amounts of capital to internet companies Elmer, Three waves of overseas listing can be identified from Table 1 : the late s to early s, —, and Sohu, Netease, and Sina went for overseas public listing first while Tencent and Baidu followed suit in and Through overseas listing, Chinese internet companies drew liberally on foreign investment capital, which in turn was hungry for returns drawn from the booming Chinese market Schiller, Nonetheless, listing stock on foreign stock exchanges poses legal challenges to these companies.

On the one hand, to choose to list on foreign stock exchanges enables greater access to global capital markets and the ability to raise money for business expansion, whilst on the other hand, it means that companies must subject themselves to laws and regulations set forth by foreign jurisdictions. Netease and Alibaba have run into legal troubles with foreign stock exchanges, which triggered a decline in their stock evaluation. Netease later received a class action law suit from Frank Satty for violating U. In , the U.

This means that the engagement of a global financial advanced business service team FABS is indispensable in underwriting the IPO process. As Table 2 shows, all nine companies, with the exception of Sina, employed a team of foreign investment banks as underwriters in their IPOs. In the underwriting process, investment bankers work and foster close relationships with the top executives of the companies.

Foreign individuals and capital provided important initial investment for nine Chinese internet companies examined here. The global flow of technical know-how and interpersonal connections the key founding figures fostered when they were working in Silicon Valley or studying overseas were also instrumental in the founding of Sohu, Sina, and Netease. Upon examining the organisational structure of each of the nine Chinese internet companies, one stark commonality stands out — they all employ variable interest entities VIE as corporate architecture in the preparation for public listing.

As shown in Table 1 , all nine companies were registered in offshore jurisdictions and tax havens, with the Cayman Islands being the most popular choice among the nine, given their low corporate tax rate and lack of transparency. Therefore, all nine companies are considered foreign firms under Chinese regulations. The VIE structure thus kills two birds with one stone: it circumvents the imposed foreign ownership restriction whilst it guarantees profits and benefits distribution to foreign investors and leaves the control firmly in hands of the company in China.

A VIE structure is usually composed of an intermediary wholly foreign-owned entity WFOE , which is a shell company registered in offshore jurisdictions, and multiple operating entities registered in China. Then, through a series of contractual agreements detailing the level of control and cash flow, the WFOE is linked to an operating entity in China. Foreign investors do not directly own shares in the operating entities in China but instead, in WFOE.

All these efforts eradicate frictions for capital accumulation.

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The unintended benefit in deploying a VIE structure is getting around other state regulations, such as real name registration requirements. For example, other than the bulletin board system and online gaming operations, foreign owned internet businesses are not required by PRC laws to ask users for their real name and personal information when registering an account. The inconsistency of internet regulation for domestic and foreign businesses has long been a key feature of the Chinese internet Dai, The complex and murky VIE structure generates legal controversies in stock market regulation and causes concerns for foreign investors.

In fact, the first episode of the VIE dispute took place in Sina in , when its board announced the decision to remove one of its board members and Chief Executive Officer Wang Zhidong.

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S stock exchanges. The Commission questioned the legality and ambiguity of VIE structures in this report.

In fact, the VIE structure has been under close scrutiny from different ministries within China as well Rosier, The debates around the legality of the VIE structure deployed by Chinese internet companies suggest a collusion between state and corporate interests. Different ministries and regulatory agencies came up with diverging opinions on VIE structure. Without relevant inter-bureaucratic agreements, the Chinese government has not launched any significant efforts to systematically regulate VIE structure.

The enforcement of regulations listed in Table 3 has not been consistent either. The wide deployment of the VIE structure by all nine companies demonstrates the contradiction-ridden globalisation process: companies taking advantage of legal loopholes to bypass national jurisdictions to maximise their worldwide hunt for capital, under the aegis of the state, which safeguards the interests of these companies by leaving private companies much manoeuvring space.

The regulation of VIE structure in China defies the antagonistic portrayal of relations between state and private enterprises. Instead, the government is in fact siding with the interest of big companies. Tables 4 and 5 show the ownership and management of these nine companies overtime. Several key observations can be made.

First of all, the founders and key management personnel own significant shares for all nine companies, either through individual shareholding or through offshore entities they wholly owned. Next, secondary to founders and key management personnel, financial institutions, banks and venture capital fund hold significant shares for all nine companies over time. In , News Corp made some headway into the Chinese telecommunication market by acquiring Thirdly, all nine internet companies examined here exhibit patterns of cross-ownership.

Australian financial group Macquarie Bank owns In , American asset management firm T. Rowe Price Associate simultaneously held 6. Dan Schiller notes that Chinese communication and internet companies all exhibit opaque ownership structure, in which institutional investors bulk large, including many private equity and hedge funds as well as various sovereign wealth funds While this is true, founders of each company and key management personnel also jointly rank with institutional investors as the biggest owners, which suggests the cluster and concentration of power in the hands of very concentrated media and financial elites.

Investment banks, venture capital funds, as well as Silicon Valley tech know-how have in large part contributed to the founding of Sina, Sohu, and Netease. When capital was lacking domestically, the founders of these companies benefited from foreign initial investment through interpersonal ties they cultivated when working or studying overseas. Secondly, these nine internet companies all launched their global pursuit of capital through share issuance and stock listings, with the critical help, again, of foreign investment banks, such as Goldman Sachs and Morgan Stanley as underwriters.


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To further bypass national restrictions of foreign ownership for value-added telecommunication services, all nine companies deployed a VIE structure, which enables them to access a large pool of foreign capital without relinquishing control over company operations. This corroborates a previous study of the globalisation patterns of mainland firms, that showed that Latin America, the British Virgin Islands and Cayman Islands accounted for Finally, financial institutions and FABS wield structural power in these companies by owning a significant portion of shares issued, as well as through the election of board members.

Concomitant with recent policy changes, there are three main takeaways that can be drawn from the analysis.

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However, the frenzy of different variations of the sharing economy in China, such as sharing bikes and sharing gym pods, have hardly proven their economic viability. Commercial development and success of the internet in China is in no way, contradictory to political control.

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Secondly, by showing the specific ways internet companies in China are wired to global finance networks, this paper challenges the popular perception of the Chinese internet as an insular intranet, which is politically contained and enclosed via means of censorship, blocking and filtering. On the contrary, when we examine the flow of capital, these nine Chinese internet companies, as well as many others, are deeply plugged into global finance networks and expanding outward. The analysis in this paper is limited to these nine companies but for future research, big internet businesses and state-business relations will be important in grasping the power dynamics of the Chinese internet.

A recent shareholder upheaval at Sina illuminates the perils of shifting power relations. Owning 3.

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S hedge fund Aristeia Capital waged a proxy war at Sina, nominating two individuals for election to the board of directors and urging a potential merger with Weibo to increase returns to shareholders Sina Corporation, Under the command of capital investors, Chinese internet companies have transformed into platforms of capital accumulation on a scale unprecedented before. As well as the inflow of foreign reserves from a trade surplus and foreign investment, the value of the Chinese currency was supported by large foreign reserves and by its strong purchasing power.

Retail prices in China in March were 1. These factors provided strong fundamentals for the value of the Chinese currency and made devaluation unnecessary.