After seven years building up a magazine empire in China, I had it stolen by the state. I lived in the grey zone that is China's media business and, despite my commitment to the country, paid a high priceby Mark Kitto / April 23, 2006 / Leave a comment
“I have good news,” said Mr Yuan of China Intercontinental Press. He removed his glasses and looked hard at a spot below my right shoulder. “My leaders have agreed, in principle, to create a joint venture with you.”
It was early 2004 and we sat in a bare villa-style apartment, an hour’s journey by taxi from downtown Beijing, near the old Summer Palace.
As Mr Yuan spoke, I could not believe my ears. His publishing company was controlled by China’s State Information Council, the Communist party’s propaganda machine. No one had got this far, not even Rupert Murdoch. (Indeed, within a few weeks of my meeting he would admit he had “hit a brick wall” in China.) The only partial exception was Li Ka-Shing, Hong Kong’s richest man, with massive property investments in China and a symbolic media joint venture with a mainland magazine. I had built a “mini media empire” in China, as the Financial Times described it, and now I was going to own part of it.
No individual “owns” media in China, only the government. The industry is controlled by licences, issued by government entities to government entities. But Chinese officials have difficulty making media businesses make any money, so the press has become the most tightly controlled, yet most loosely regulated industry in this contradictory state.
Now a man with a direct line to the highest authority in Chinese media was offering me, a foreigner, an ownership stake in a media business.
It all started by accident. I only ever wanted to be a journalist. But things happen fast in China, and in 1998, within eight months of resigning from the trading job that had brought me back after studying here in the 1980s, I had become the co-publisher of two city magazines. With my business partner, Kathleen Lau, an American national of Chinese origin, I started in Guangzhou in 1997 with a simple expatriate community paper. Within six months of opening Clueless in Guangzhou, Kathleen and I had taught ourselves all we thought we needed to know about the magazine business. We were ready for the big time. So we moved to Shanghai and launched what would become my life’s work, Ish (“in Shanghai”), the monthly magazine that spawned the that’s brand.
I have always hated the word “expat.” Ten years ago, the few English-language magazines for the international community in China were smug and insular in that expat manner. “You poor buggers,” they seemed to say, “stuck in China, far from home. But don’t worry, we’ll help you cope.” Then they listed all the bars that served burgers and fries. By contrast, our editorial line was something like: “You lucky bastards, we are witnesses to the most exciting time in China’s long history. And we are part of it too. Let’s get the most out of it, and put something in as well.”
We first flew into Shanghai’s old downtown Hongqiao airport, on 1st May 1998. Working like madmen, we broke even in three months. By then the Observer was calling us “the Time Out for Shanghai.” Our business grew faster than a Shanghai skyscraper.
But that September, we were shut down. It started with a call from a government bureau, one like the many we had already taken. But this time it was serious. Two hours after the call, a parade marched into our office—four bureaus altogether. In blue trousers, white shirts, caps, epaulettes and gold braid were the men from industry and commerce, known colloquially as the “Gongshang.” The two men from the “entry and exit” bureau wore drab olive military uniforms. The only civilians represented the news bureau. A couple of policemen in dark blue suits completed the tri-service effect, as if China’s air, land and sea forces were lined up against us. We had sent every member of our staff out on errands. The only people in the office were me and Kathleen’s cousin, Shirley Li, a Chinese national under whose name our business was operating.
We had just enough chairs for the nine visitors. Shirley and I arranged them in a semicircle and sat in the middle. “Will you have some tea?” asked Shirley.
“No thank you,” replied one of the civilians. He looked older, wiser and more at ease than the others. Coughs were politely passed around the circle.
“How can we help?” asked Shirley and I almost in unison. So long as the conversation stayed in Mandarin and did not slip into Shanghainese, I had no problem keeping up.
“This magazine you are producing,” said the older civilian. “It’s illegal.”
“Because it’s illegal,” he explained. “You can’t do it. No one can publish a magazine without permission.”
Shirley and I took turns. “Can we get permission?”
“And you have no business licence!” One of the Gongshang could not wait.
“How do we get the right business licence?”
“You can’t!” he almost screamed.
“Can I see your visa and work permit?” entry or exit, I am not sure which, chipped in—looking at me.
One of the Gongshang butted in. “Who is behind this? Why are you doing it?”
“It was just an idea we had, to help foreigners understand more about China. Here, let me show you.” I picked up a copy of the magazine and passed it over.
The older easier man in plain clothes was handed the magazine. He flicked through it with unreading eyes.
I addressed the top of his head earnestly. “Many foreigners are coming to China. They want to invest. They like to find things they are familiar with and our magazine can be that for them, and show them how to live and be comfortable here.”
“This business is illegal,” repeated one of the Gongshang. “You have no licence to publish or print. You have no licence to sell advertising. You have no licence to rent an office. You have no licence to be here.” He looked triumphant. He was absolutely correct.
“Well,” said Shirley in her sweetest voice, “perhaps you could tell us where to get those licences?”
“Of course. But if we could, where would we get them?” Shirley pressed on.
The Gongshang were stumped. The old and easy civilian stirred in his chair and looked up. “First you need a publisher,” he said.
And thus it started. The civilian’s name was Mr Wang, and in a fatherly way he began to explain the process. He read us the rules and described how to break them. We needed a kanhao, a publishing licence. Only official publishers had kanhao. It could not be rented or loaned. Perhaps he could help us find one?
We would need a company registered in Shanghai, added one of the Gongshang. Shirley’s company was not. We must set up a branch office or find a local company to put our business through. Maybe he could introduce us to an appropriate one. Our foreign staff needed visas. This could be arranged, said the entry and exit bureau, taking turns, but you needed a company to employ them first. A visit to their office would sort it out.
And then, added a policeman, looking a little upset to have been left until last, don’t forget to tell the foreigners to register at their local residence committee. We were employing the old method of seeking “forgiveness, not permission” and it seemed to work. Ask permission for something out of the ordinary, and not one of the regulatory bureaus—even if you can work out which one you should talk to—will take responsibility. Even if your project is run of the mill, it is still quicker to get on with it while your applications are under way—as long as you can prove that you are trying to get permission from someone.
We were illegal, unlicensed, and in a heap of trouble. None the less, subtly steered by kind Mr Wang, they were leaving us a lifeline. We pursued it like a cat playing with a piece of string. Each time we touched it, an official chipped in his pennyworth of regulation and the string darted in another direction. But thanks to our persistence and Mr Wang’s prodding, the lifeline was never tugged out of reach.
After four exhausting, nerve-racking hours, they stood up. “So, that’s that,” declared Mr Wang with a smile. “You are banned. You may not continue your business. You may not publish, print, edit, sell advertising or distribute.” He paused. “Here’s my number if you have any questions.” He walked out of the door and the rest followed.
Appropriately, the last to leave was exit, though he might have been entry. With his foot on the threshold he turned to me and asked: “Mark, if we do let you stay in the country, and you do find a way to keep producing this magazine, can my office put in some public notices for foreigners please? We have a real problem getting our announcements to them.”
“But of course,” I beamed.
“Thanks,” he said. “We’ll keep in touch.”
Mr Wang was as good as his word. We were introduced to the Shanghai Pictorial, an English-language propaganda piece no longer publishing because it could not afford to. Instead, the staff made a small bonus on their government stipends by printing calendars for state work units.
The deal was simple. We rented their publishing licence, in effect resurrecting their magazine. Any extra money we made from advertising, we kept. The numbers were crippling—the publishing licence was 1m yuan a year—but we had no choice. The magazine had to have the name Shanghai Pictorial prominently on the cover and the name we had used for our first three issues, Ish, was banned.
That’s how that’s started. The main feature of our first issue with the Pictorial was the Shanghai arts festival. We used the words “that’s entertainment!” on the cover, except the word “that’s” was enormous, and “entertainment” very small. For December we shouted “that’s all folks!” With the same layout. Then in January 1999 we called ourselves that’s Shanghai. We had a brand.
The Shanghai Pictorial never noticed. They were too busy preparing to shut us down again. We had served our purpose by relaunching their magazine. We discovered our fate from advertisers who had been told space was available only after the February issue. I was called to the Pictorial’s office just as we were going to print with that issue.
“The authorities say we are not able to produce the February issue,” the editor-in-chief told me. “I am so sorry,” I replied, lying. “But the magazine is printed, and on its way to be distributed.”
“Oh dear.” He looked upset.
“And since we have an agreement for a full year, perhaps you could show me the official document stating we must stop?”
“Er, there isn’t one.”
“Then I assume there should be no problem, at least for this issue?”
He faxed over a piece of paper a few days later with an official chop from the news bureau. In March the Pictorial came out with a new magazine. It was called SH, the letters in precisely the same font and spot on the cover as our banned Ish.
But we had got our February issue out and had already lined up another publisher for March. Once again the godfatherly Mr Wang had pointed us in the right direction, this time to Beijing. “They are senior to Shanghai up there,” he hinted. The next partnership, with the official title of “China Light Industry” across the foot of our cover in almost invisible grey letters, lasted another three months. But we kept the name that’s on the top. We were the talk—and read—of the town. Thanks to our lively editorial, and objective reviews, the magazines were flying from the bars, hotels and restaurants where we dished them out for free. Circulation rose from 20,000 to 25,000 a month.
We were also getting used to the game of cat and mouse. Kathleen, Shirley and I were always on the hunt for bigger, better partners. We criss-crossed the country, dining potential contacts, listening to countless offers of help and their impossible conditions.
The shutdowns usually happened just as we were about to go to print and they always coincided with record advertising sales. But by spring 1999, we were heading for $50,000 an issue.
It was a surprise when I discovered who the cat was. There had been talk for months about the Shanghai city government’s plan to launch a new daily newspaper in English, the Shanghai Daily, to satisfy the demand of the swelling international community. To ensure the success of its paper, the city government employed a simple tactic, by no means unique to China, but infinitely easier in the Chinese media’s special circumstances: shut down all competition.
No matter how I pleaded to the leaders of the Shanghai Daily, once I had found them, that a monthly arts and entertainment magazine was no threat to a daily newspaper, my words fell on deaf ears. When we finally succeeded in getting them to the table, and offered to make sacrifices so we could get along, we were told, point blank: “No you won’t.”
The raids on our offices lost any semblance of subtlety. They sent the thugs round. I was lucky to have a sympathetic mole in the junior ranks of the Daily. Every time we met I was reminded: “My boss is out to get you, Mark. Watch out, and good luck.”
At times it seemed every other official in Shanghai was out to get us. On one occasion I attended a press launch where I bumped into the director of the Shanghai Grand Theatre. “Ah, Mark,” he exclaimed. “Good to see you. Do you have a copy of your magazine with you? There’s someone I’d love you to meet.” A small party of overseas-looking Chinese was trailing behind him.
“This is my cousin from New York and his family. He left Shanghai ten years ago.” The man shook my hand and introduced his wife in perfect English.
“Now come on,” the impresario was saying. “Show them your magazine. I want them to see how things have changed in Shanghai.”
I dug into my briefcase and he snatched the latest issue from my hand as I pulled it out.
“Look at that!” He had turned to his cousin already. “See? We have a proper city entertainment magazine now. My theatre has even been reviewed in it a few times, haven’t we?” He turned back to me with a grin.
The cousin looked impressed. “Boy, things have changed! May I keep it? I’d love to show my friends back home how my old hometown is catching up.”
A few minutes later I was talking to a young local journalist whose editor I had interviewed in the current issue. I had extracted another copy and was opening it up, when a short man in a suit appeared from nowhere and snatched it from my hand. He spoke fiercely to my acquaintance. I looked on awkwardly in silence as the newcomer flicked the pages and jabbed his finger at the advertisements. He was turning puce with fury. I strained to pick up the gist of his diatribe in the harsh Shanghai dialect.
“Illegal… should not be allowed… unfair… too much advertising… too much money… stop…” Then he drew a finger across his throat and for dramatic effect stabbed the same finger on the cover.
“Excuse me,” I interjected in Mandarin. “But I don’t think we have met.” I offered him my card.
“You don’t need to know who I am,” he spat back, brushing away my card.
“Yet you seem to know who I am,” I persisted.
“Huh,” he grunted. “Since you are so ignorant, you may as well know I am one of your leaders. I am in charge of you. We know what you are up to. Your magazine is going to be banned. I’ll make sure of that.” He threw the magazine at me and marched off.
Five minutes ago a Shanghainese official had been praising that’s Shanghai to the skies. Now another was wishing us dead.
There was only one way out—upwards. That’s how I found myself on a cold spring day in 2004, sitting with Mr Yuan in his villa-style apartment near Beijing, waiting for him to explain how my battles were now over.
In the intervening five years I had bought out Kathleen, set up a foreign joint venture consultancy company, and invested 3m yuan ($350,000) to bring my formula north to the capital by launching that’s Beijing, with a circulation of 20,000, to add to the other titles, that’s Shanghai (now 45,000) and that’s Guangzhou (15,000). There had not been a single cent of investment or finance from outside.The business and the magazines were entirely “self-made.”
My stalwart supporter, the organisation that had looked after me through thick and thin and helped me get here, was the Yangzhou people’s government news office. It was not even a publisher, and had no kanhao, but Yangzhou was the hometown of Jiang Zemin, then China’s president, and the Yangzhou clique was powerful. The Yangzhou people also understood what I was trying to do: promote China to foreigners in a way that they appreciated. I was happy to run soft advertising, subtly signalled as such, about Yangzhou in return. I truly liked the place.
I had a consultancy agreement with Yangzhou, which since 2002 had a publishing agreement, that I had drafted, with China Intercontinental Press, whom we had to ally with when we got too big.
I had fought off attacks from jealous rivals and been investigated by every bureau with the slightest connection to publishing, and by many who did not: nine in total. I had paid over 1m yuan in fines, and who knows how much more in administration fees to government “agencies.” I had been accused of being a pimp, a China “splittist,” a Falun Gong supporter, a pornographer and a spy. My staff had been extradited, my office computers confiscated, and my magazines impounded at the printers. I had got them all back. I had been through eight government publishing partners before China Intercontinental Press, and half a dozen advertising agencies.
The three that’s magazines I had built from an investment of $20,000 were turning over $4m a year, with annual profits from Shanghai alone of half a million, ploughed back into the business. Once Beijing broke even, I would be in the money. I was managing 120 staff and four offices, and printing magazines with combined circulations of almost 100,000 a month. But they existed only on their own paper. No one owned them. Not me, not one of the many publishers I worked with, none of the advertising agencies I put my business through, not even government agencies like Yangzhou news, which sheltered us. The publisher, now China Intercontinental Press, held the licences, which I rented from them. I owned the trademark to the that’s name, my trump card, and I controlled the operation of the magazines from a grey zone between official sanction and popular appeal.
Meanwhile, I had married a Chinese woman, had had two children, and had taken a long lease on—and spent a fortune restoring—an old summer house near Shanghai. I was committed to China. I had come here because I loved the place, for the adventure, for the chance to do something no one had ever done. There was no turning back. The schoolmates who used to call me “Chinky” because of my oriental sounding (Cornish) surname could feel vindicated.
The mayor of Shanghai took a collection of that’s Shanghai issues to Paris in 2002 when he presented his successful bid for the 2010 World Expo. I daresay a copy of that’s Beijing came in handy for the capital’s Olympic bid. I had resurrected another magazine for the Shanghai tourism bureau, both to broaden my portfolio and to convince the city leaders of my good intentions. I even wrote the words that greet you on the billboard as you drive into Shanghai from Pudong airport: “Seven Wonders of the World, Seven Days in Shanghai!” Above all, with my three that’s magazines, I had created something the Chinese government valued hugely but had never believed could exist: profitable propaganda. I had even paid them handsomely for it. I had done my bit for China.
So when I heard Mr Yuan tell me he had “good news” about an “in principle” joint venture, I assumed that owning some of what I had created would be my reward. But then he continued: “We can offer you a joint venture with that’s China.” I felt as if I had been punched in the stomach. That’s China was an unprofitable and editorially embarrassing national version of my successful city magazines. I was not involved, but it used my that’s title trademark. “How much can you invest to make it work?” he asked.
“Mr Yuan,” I replied, feeling sick, “you know what I think of that’s China. You launched it without me. You took the brand I built and cheapened it. The six-page articles on pig farming make a mockery of everything I have created. You give free advertising to my clients and now my city magazines can barely charge enough to pay the kanhao fees… If you are willing to give me a joint venture with that’s China, why not give me one for the city magazines?”
“We don’t have the ability,” he replied. Mr Yuan had warned me this would not be a negotiation between equals. He had also told me that he could decide the law. “What if I switch my consultancy agreement from Yangzhou to your company?” Yangzhou had been great friends to me, but what could I do?
“It is illegal for a government agency to have a consultancy agreement with a foreign joint venture,” he answered. Needless to say, there was much visible evidence to the contrary. Mr Yuan had promised to secure my ownership interest when we started working together two years earlier. Now he had reneged on that promise. The light at the end of the tunnel—the prospect of formal ownership—that I had been inching towards for seven years was snuffed out. The magazines I had built now belonged to Mr Yuan and the State Information Council. Of course, I could always stay in charge of that’s Shanghai, that’s Beijing and that’s Guangzhou and do what I wanted with the profits—before they disappeared in the usual interference. Already, said Mr Yuan, the “administration fees” for the kanhao were to be trebled.
Four months later I was locked out of my Shanghai office. Mr Yuan was inside with my chief financial officer and national sales director, talking to my staff. They were given the choice of working for the government and my chief financial officer’s advertising company, which I had set up, or taking their chances with me. Mr Yuan presented them with an announcement from China Intercontinental Press declaring that my personal involvement with that’s magazines was forthwith illegal. The implication, if they stuck with me, was clear. The staff knew perfectly well who was behind the Press. The Chinese wife of my general manager in Beijing had already been threatened with jail if she did not betray me.
I saw Mr Yuan again in February, in court. It had been a year since he had taken my business. He had initiated a trademark dispute while pretending to negotiate a licence agreement for the name that’s—trademarks being the only media assets an individual can own outright in China, it still belonged to me. Thanks to two key pieces of evidence, he had won the dispute. Now I was appealing against that decision, and telling the judge that I believed those two pieces of evidence were fabricated. All I had left was the law, reinforced by the well-publicised efforts the Chinese government is making to protect intellectual property. The judge certainly perked up when I presented statements from the people Mr Yuan had leaned on to provide the evidence. They admitted to collusion. Mr Yuan did not look happy. It will be months before we have a ruling.
There is a theory about doing business in China that says—surrender first, then hope to win later. But virtuous intentions and signs of good faith here are taken as admissions of weakness. By forcing foreign investors to surrender, China keeps the advantage in its hands. The furore about Google and other internet companies is just the latest high-profile example.
The handicap for western business people is that we believe in fairness. But today’s China does not believe in fairness. It believes in power and money.
I did not surrender my soul to China, as so many foreign businessmen have, but I did pawn it for a while. Finally I was invited to give up my long-term dream and accept whatever short-term benefit I could salvage from a system that I naively thought I could change just enough to acknowledge a foreigner with good intentions. In the end, I refused.
During my trademark dispute, the State Information Council circulated an official letter to the Gongshang bureaus whose help I had requested to protect my rights to the that’s name, a valuable piece of intellectual property. In the letter were the words: “…please bring your department in line… this is a case of a foreigner harming the serious work of China’s external propaganda.” I suppose that by now this is true. It makes me genuinely sorry. I’d still like to do something useful in China.
A big US publisher commissioned a book by Mark Kitto. After the manuscript had been edited, the publisher dropped it for fear of harming its Chinese interests. Those interests fall under the authority of the State Information Council.