Tea Leaf Nation

Five Harsh Lessons for Chinese Private Business

Censors just axed several innocent U.S. shows. What gives?

HONG KONG — It's a plot twist few saw coming. Not long ago, China's video streaming sites were trying to clean up years of copyright violations by paying big bucks to license popular U.S. television shows. For their part, Chinese fans had begun to abandon the ubiquitous and cheap pirated DVDs which had long been their conduit to Western television in favor of online videos with good subtitles and better picture quality. This story of transgression and redemption had been going swimmingly -- until a shadowy government agency emerged to throw a wrench into the works. It all went down on April 25, when four popular U.S. television series -- The Big Bang Theory, The Good Wife, NCIS, and The Practice -- were removed from major Chinese video streaming sites. Aghast audience members are now left to parse this sudden turn of events.

For years -- unlike state-owned television networks in China, which are kept on a perpetually tight leash by central authorities -- Chinese video-streaming platforms like Sohu and Youku, both of which are operated by U.S.-listed companies, had been relatively free to show content either purchased from overseas providers or produced in-house. Since Sohu first licensed the U.S. television series Lost in 2010, Chinese Internet giants, in competition for web traffic and advertising revenue, have spent millions of dollars bringing free, on-demand streaming of foreign shows and movies to the Chinese market. According to Youku's Chief Content Officer Zhu Xiangyang, the site's traffic from U.S. series has increased 13-fold over the past three years, with the majority of the audience being well-educated 18- to 40-year-olds living in first-tier cities such as Beijing and Shanghai.

The recent move comes as a shock -- but it's also a teachable moment. Here are five insights about China that can be gleaned from this latest news.

1.              The exercise of political power is arbitrary.

The State Administration of Press, Publication, Radio, Film and Television (SARFT), the government organ responsible for censorship of all sorts in China, has given no reason for singling out the four shows for removal while leaving others alone. In the past, online content has been removed for vulgar, violent content, or negative portrayals of the Chinese government. But the four recent victims did not offend on any of these fronts. In fact, as of April 29, over a dozen U.S. television show remain available on Sohu and Youku, ranging from supernatural teen drama The Vampire Diaries to sci-fi thriller S.H.I.E.L.D. to mockumentary sitcom Modern Family. Some have speculated that horror drama The Walking Dead might be next on the chopping block for excessive violence, but there doesn't seem to be any rhyme or reason to SARFT's decisions.

2.              Business always comes second to politics.

On April 28, Sohu CEO Charles Zhang told Chinese tech blog TMTPost that a few "stand-alone" incidents do not indicate a policy change. That may be wishful thinking. An article from the same day on Communist Party mouthpiece People's Daily states definitively that the move is indeed part of a recently announced crackdown called "sweep out porn, strike at rumors," one which has already gone beyond its stated ambit to target content like online fiction. The article also warns that more bans are underway and that shows from the United States, the United Kingdom, South Korea, and Japan will be reviewed by censors beforehand. (It adds that a crackdown on British shows is next.)

3.              Private companies must always stay on their toes, no matter how big they become.

Major Chinese Internet companies are privately held. In China, that means more freedom to operate, but less political protection when things go awry. Sohu has invested heavily in licensing U.S. television shows, scoring the exclusive rights to The Big Bang Theory, and now stands to take a large loss on licensing fees when the show was removed from the site. Sohu's shares on Nasdaq hit a one-year low after the ban, while Youku's shares on the New York Stock Exchange slumped to the lowest price since August 2013.

4.              Competing with state-owned companies is dangerous.

It's worth noting that state-owned television channels are in the business of airing the same shows as Chinese streaming platforms. Respected Chinese finance magazine Caijing has reported that state media behemoth CCTV, which operates its own entertainment channels, will soon air a "healthy and green" (read: heavily censored) version of The Big Bang Theory. CCTV has also introduced a newly dubbed version of Game of Thrones, a fantasy series featuring plenty of violence and nudity, to its paid channel.  

5.              It helps to have friends -- or fans -- in high places.

House of Cards, a Netflix series that prominently features a corrupt Chinese antagonist, would seem an apt candidate for removal.  But it remains available on the Chinese web, at least for now. One reason could be that Wang Qishan, China's corruption czar and a member of the standing committee of the Politburo, has publicly cited the dark political drama based in Washington, D.C. as one of his favorite shows.

Axing popular foreign shows certainly isn't a way to win Chinese hearts and minds. Today's Chinese youth see U.S. television shows as a window to a foreign culture, not to mention an opportunity to improve their English. (Chinese schools teach English, but focus more on reading and memorization.) Fans have started themed cafes, online forums, and even volunteer groups that arise early in the morning to translate subtitles for their favorite U.S. shows. In addition to the recent casualties, shows as diverse as sitcoms like Friends and 2 Broke Girls, but also crime drama Breaking Bad have developed fervent Chinese fan bases.

If anything, the recent takedowns have brought censorship to the doorstep of young Chinese web users who may not have experienced it directly before. Many young Chinese are either indifferent to politics, or at least profess to be so. But it's one thing to take away citizens' right to petition, of which most won't seek to avail themselves anyway. It's another thing to take away their favorite TV.

Photo: Getty Images

Tea Leaf Nation

China's New Class Hierarchy: A Guide

Communist? Hardly. Here's how to know if you're a titan or a nobody in the People's Republic.

HONG KONG — Class is a sensitive word in China. Marxist-Leninist rhetoric like "class enemies," "class conflict," and "class struggle" are rarely seen in the country's media these days, but since China began its market reforms in 1979, stratification has emerged in a society that had hitherto tried to eradicate the very concept. After 35 years of breakneck-speed development, social class has become increasingly entrenched, opportunities for upward mobility increasingly limited.

But don't take our word for it. On the Chinese web, a popular (anonymous) post currently making the rounds offers a revealing dissection of China's current class structure, dividing society into nine tiers, describing the first three tiers as the "ruling class" and the bottom three as the "underclass." The division is based on political power and connection as much as wealth and prestige, reflecting the fact that the ruling Communist Party plays an extraordinarily large role in the distribution of social goods in China.

Chinese authorities might blanche at the revival of words like "ruling class," but numbers back it up. In a 2013 report, the consulting firm McKinsey categorized 3 percent of the total 256 million urban Chinese households as affluent with an annual disposable income of more than $34,000, 14 percent as upper middle class with an annual disposable income between $16,000 and $34,000, and 54 percent as mass middle class with an annual disposable income between $9,000 and $16,000. The rest were defined as poor. Foreign Policy translates the post, in part.

Tier 1: The Head Honchos  

 

Who they are: Current members of the Communist Party Politburo, which oversees the ruling party; certain retired members of the Standing Committee, the highly selective sub-committee of the Politburo that essentially runs China.

Tier 1 has the power to set agenda and make decisions regarding national and international policy. The Politburo has 25 members, including seven standing committee members. A handful of retired standing committee members are also usually assumed to wield power from behind the scenes. There are probably about 30 people in China who can be considered a member of this elusive class.

Tier 2: The Bigwigs  

Who they are: Ministers and provincial-level heads with substantive power; retired Politburo members; certain politically-connected business magnates, tycoons and bankers (property magnate Li Ka-shing is pictured above). There are probably about 200 people in China who can be considered Tier 2. Members of Tier 2 have direct influence on national policymaking.

Tier 3: The Powerbrokers

Who they are: Ministers and provincial-level heads with less power; owners of top companies like Tencent or Alibaba (the latter's founder, Jack Ma, is pictured above); regional magnates and very wealthy businesspeople; chancellors of elite universities.  There are probably about 4,000 to 5,000 people who can be considered Tier 3. Members of Tier 3 exert some influence over the development of certain regions or industries.

Tier 4: The Privileged

 

Who they are: Municipal or county-level party heads; prominent university professors; owners of medium- to large-sized companies; top managers at large corporations; well-known doctors and lawyers; famous writers and celebrities (like Fan Bingbing, pictured above). There are probably 5 million to 10 million people who can be considered Tier 4. Those in Tier 4 have ties to the ruling class (as do those further up the chain).

Tier 5: The Very Comfortable

Who they are: Mid-level party cadres with power over certain pockets of local policy; successful small- to medium-sized business owners; university professors; mid-managers of large corporations; owners of multiple real property in large cities; reputable doctors, lawyers, and engineers. There are probably 100 million people who can be considered Tier 5. Members of Tier 5 have control over their careers.

Tier 6: The Squeezed

 

Who they are: Ordinary civil servants; white-collar workers; ordinary doctors, lawyers, and engineers; modestly successful small business owners. There are probably 200 million to 300 million people who can be consider Tier 6. Those in Tier 6 have social mobility to ascend to Tier 5 or even to Tier 4.

Tier 7: The Marginalized

Who they are: Ordinary factory workers; owners of mom and pop shops; urban residents with odd jobs; wealthy peasants. There are probably 500 million people who can be considered Tier 7. Those in Tier 7 have the means to subsist in medium to large Chinese cities.

Tier 8: The Underclass

Who they are: Migrant workers in sweatshops; ordinary peasants. There are probably 400 million who can be considered Tier 8. Those in Tier 8 can eke out a living on their own.

Tier 9: The Destitute

Who they are: Long-term unemployed urban residents; impoverished peasants in far-flung rural areas. There are probably 100 million people who can be considered members of Tier 9.

Photos: Getty Images