Between corporate development and public service: the cultural system reform in the Chinese media sector

Abstract

If the cultural system reform in the 1980s and 1990s was peripheral and sluggish, in the 21st century it has become a central part of China’s unswerving reform and noticeably gained velocity after 2008. Aiming to build up a cultural market economy, the reform is transforming the majority of cultural institutions into state-owned and even state-controlled shareholding corporations, while strengthening the public service obligation of state financing in a few non-profitable areas. By chronicling and contextualizing reform efforts, this article not only documents some major lines of market development but also examines why and how the state is realigning its public and corporate sectors in such a particular mode of synthesis, especially in two leading media sectors: film and TV broadcasting. While Chinese communication scholars have documented how the overlap between the state and market forces creates dominant cultural processes in China, focusing on the state’s straightforward efforts at commercialization, this article offers an updated understanding of verifiable policy and institutional changes—especially the ‘de-commercialization’ movement embodied by the return of public units.

Keywords

China cultural industry cultural system reform film public cultural institutions TV broadcasting

The first decade of the 21st century is a crucial developmental period for China. In this decade, the culture sector becomes important in the country’s developmental strategy. In the 1980s and even in the 1990s, the cultural system reform (wenhua tizhi gaige) was a ‘peripheral’ part of the market reform (Kraus, 2004: 22). In creating Chinese-style capitalism, governments at various levels turned to outside investors to jumpstart an export-processing economy, while introducing market reform to state-owned industries. On the sidelines, the state also partially commercialized public service areas such as housing, education, and medical care, arguably to stimulate domestic consumption and to expand market activities. Likewise, the cultural system reform set out to commercialize formerly state budget-supported institutions, without restructuring state ownership. In the 2000s, however, the cultural system reform moved from a peripheral position to a central one. The 16th Party Congress in 2002 explicitly called for strenuously developing cultural industries (chanye) while strengthening public cultural institutions (shiye). Developing cultural industries became an important task of the national economic restructuring scheme. In 2003, pilot projects started in selected institutions and regions. In 2005, the ‘guiding opinions on deepening reform of the cultural system’ (Guanyu shenhua wenhua tizhi gaige ruogan yijian) issued by the CPC (Communist Party of China) Central Committee and the State Council marked the comprehensive implementation.

In Communication in China (2008), Yuezhi Zhao noted that the cultural system reform in the 2000s—which covers but is not limited to media—has instigated two poles of development: public service and corporate expansion (Zhao, 2008: 109). The double-pronged goals of re-legitimizing public cultural institutions on the one hand and creating cultural industries on the other hand illustrate the contradictory demand of China’s development. Especially after the global economic crisis in 2008, a wide consensus emerged among policy makers and mainstream economists about the nature of China’s economic imbalances, including heavy reliance on investment and exports, decline in residential consumption, an outsized manufacturing sector, and an underdeveloped service sector (Lardy, 2012: 2). To correct these imbalances, the culture sector, comprising myriads of institutions and activities ranging from museums and libraries to online gaming and animations, was designated to play an important role. To boost China’s service industries, the country, among other tasks, seeks to develop innovation capacities in cultural and artistic productions (World Bank, 2012: 15). To create effective domestic demand, the state seeks to provide more leisure activities for the growing wage-earning classes. As China has had the lowest share of government spending in GDP among major developed and developing countries (Yueh, 2011: 674), rebalancing also means that the state should mitigate the hitherto single-minded pursuit of GDP growth and direct more investment from production-related projects to public services.

As Philip Huang reminds us, if the term ‘state capitalism’ underscores the capitalist nature of the Chinese system, while highlighting the large role of the state, the state’s official formulation, ‘socialist market economy’, underscores a socialist purpose in a mixed economy. The evolving relationship between public and corporate sectors, in the cultural arena, has a bearing on whether China is ‘going further down the path of state capitalism or living up to its socialist market economy rhetoric’ (Huang PCC, 2012: 620). Noticeably, the cultural system is a field where the state remains heavily involved. Both self-supporting and state-financed institutions, under the jurisdiction of the Ministry of Culture (MOC), General Administration of Press and Publication (GAPP), and the State Administration of Radio, Film, and Television (SARFT), constitute core cultural organizations (Table 1) (Zhang, 2006: 298).¹ The state, ‘through budgetary allocation, public property rights, administrative interference, and party supervision of senior managers’, has the ability to enforce its general rebalancing plans (Heilmann and Perry, 2011: 3). As the state is ‘embedded’ in the culture sector, how is the state realigning itself as well as the public–corporate mixture? This article, first and foremost, assesses the cultural system reform—as a policy agenda—in balancing cultural industries and cultural public institutions.

Table 1.

Economic performance of culture industries, 2008^*.

	Employed personnel (millions)	Capital assets (billion Yuan)	Yearly revenue (billion Yuan)	Value-added (billion Yuan)	Growth rate from 2004 (value-added)
Core industries	3.32	833.1	577.5	251.2	107.6%
Peripheral industries	2.48	931.9	614	218.1	247.6%
Supplementary industries	4.55	983.7	1533	266.4	92.6%
Industries of the culture sector
Core industries: (1) News service, (2) publishing, distribution, and copyright service, (3) broadcasting, film, and TV service, and (4) cultural and artistic service
Peripheral industries: (1) Internet-based cultural service, (2) tourism, leisure, and entertainment service, (3) advertising, exhibition, and cultural commerce, and (4) others
Supplementary industries: Production and distribution of cultural items, equipment, and products.

Note

This statistical method was used between 2004 and 2012. From 2012, however, the new ‘culture and related industries classification’ released by the Bureau of Statistics provides some new statistical dimensions. The biggest changes include the replacement of the ‘core, peripheral, and supplementary’ categories, with categorization according to production activities. As a result, the biggest category is cultural product production, which includes news and publication, broadcasting, TV and film, cultural and artistic service, cultural and information transmission service, cultural creative and design service, cultural leisure and entertainment service, and artifact production. Other categories include cultural consumer goods production and cultural equipment production.

Source: Bureau of Statistics (2010).

Apart from political concerns, the capital logic also energizes the cultural system reform, combining what Zhao (2008) has identified as centralized attempts at ‘securing the commanding heights’ and decentralized bureaucratic capitalist dynamics. Indeed, Chinese communication scholars have documented how the overlap between the state and market forces creates dominant cultural processes in China, focusing on the state’s straightforward efforts of commercialization in the media sector (see Huang, 2007; Lee et al., 2006; Zhao, 2008). The renewal of the cultural system reform in the 2000s and the official intention to make ‘culture’ more central to China’s development, however, calls for an updated understanding of verifiable policy and institutional changes—especially the ‘de-commercialization’ movement embodied by the return of public units. Granted that accumulation under capitalism has always been ‘dependent upon external stimuli, not simply attributable to the internal logic of accumulation’ (Foster and McChesney, 2012: 39), what are the limits and stimuli of the Chinese-style capitalism now extended to the culture sector? And how are the public service functionalities of the state re-enacted in a crisis context to address unmet social needs and, most importantly, to sustain capital accumulation? This article thus provides a critical-historical contextualization of the interplay between the state’s public service obligation and the changed institutional purpose of the cultural system now characterized by ‘partial commercialization, mixed ownerships, and continuing state dominance’ (Wang, 2004 cited in Keane, 2007: 80).

Drawing upon trade journals and yearbooks, supplemented by national statistics, government regulations, and secondary literature, the article first unbundles the cultural system reform into its official agendas, exploring the political-economic forces behind the reform process. Then, focusing on film and digital TV, it examines major lines of market development in these media segments—and explores how public services act as indispensable stimuli for capital accumulation. It argues that while the state has increased public spending in some non-profitable areas, the public service concept is instrumentally utilized in commercially successful market segments, including film and TV broadcasting, to justify market-friendly industrial policies and to support a continuing corporate reform.

The cultural system reform and its double-pronged agendas

Return of state-financed public cultural institutions

The cultural system reform in the 2000s marks the return of state-financed public cultural institutions, the significance of which can only be illustrated by a review of the earlier reforms.

China’s cultural system was established in the Mao era on the foundation of full employment of cultural professionals and complete dependence on state subsidies. This state-centric relationship subjected cultural production to a party-mandated public interest principle, which involved enhancing welfare for the masses while being fundamentally pedagogic (Keane, 2007: 82). The market reform starting in the 1980s, however, froze state budgetary support, forcing cultural institutions to seek revenue from the market. Despite its peripheral position in the market reform, the cultural system reform still created profound changes in the three-way relationship among the state, the market, and cultural institutions. Gradually, the state lost its hegemonic claim over cultural authority, making the market an alternative arbiter of cultural production. This not only recalibrated censorship standards but also weakened the material foundations for welfare provision, although the state never gave up its claim to cultural leadership (Chan, 1993).

The pace of the reform, however, was ‘sluggish and erratic’ in the 1980s and even in the 1990s (Kraus, 2004), as the government was busy with areas other than the cultural system. Ideological rigidity, institutional conservatism, and intellectual resistance all built up caution against prematurely meddling in cultural reform affairs (Curtin, 2007). In the 1980s, under the auspices of the MOC, the reform permitted market-oriented reorganization of production, personnel, and distribution on a project-by-project basis. Performing arts groups, for example, were allowed to exercise some autonomy in creating performance for sale, and to create ad hoc troupes for commercial purposes. Only into the 1990s did the reform start to enforce corporate management in employment, personnel, and distribution, while still allowing state funding to key cultural units (He, 2010).

In the 1990s, China’s market reform coalesced with the global neoliberal movement. In its heyday, the neoliberal influence encouraged commercialization of non-compulsory education and non-basic medical care. However, cautious voices inside the state resisted a comprehensive ‘industrialization’ or ‘marketization’ of culture. ‘Commercializing the culture sector’ never appeared in any policy documents (BBC, 2011). Nonetheless, pushing cultural institutions to the market prevailed. Thanks to greater management autonomy, more operational incentives, rising market ethos, and shrinking state budgets, even non-profitable cultural institutions developed activities of revenue seeking. It is common for museums to rent out space for product displays, for libraries to set up photocopy centers, and for cultural centers to introduce pool halls and video games (Kraus, 2004; Wong, 2009). The limited commercial ventures, however, failed to counterbalance the systematic state underinvestment, which had disabled these public units from guaranteeing basic cultural rights, especially for citizens in urban grassroots and rural areas.

Into the 21st century, the cultural system reform expanded beyond the jurisdiction of the MOC, absorbing a concomitant media reform. The media reform, beginning in 1992 and overseen by the SARFT and GAPP, partially commercialized media organizations by establishing advertising-dependent media subsidiaries. Since then, state media have become public institutions managed as business-oriented enterprises (Zhao, 2008: 109). Into the late 1990s, the reform developed a new focus of conglomeration, aiming to create homegrown media groups (Huang, 2007; Zhao, 2000b). By 2005, this effort drew to an end, merging into the cultural system reform. A broader concept of cultural industry, including audiovisual entertainment, news media, and book and magazine publishing, was adopted thereafter.

If the earlier phase of the reform had pushed cultural institutions to the market, the cultural system reform in the 21st century marked the return of state-financed public institutions. The 16th Party Congress in 2002 officially adopted a conceptual distinction between public cultural institutions and cultural industries (Zhao, 2008: 109). The Eleventh Five-Year Plan (2006–10) increased state budgetary allocation for public units, giving priority to the hinterland and the countryside and aiming to establish a public cultural service system. In the broadcasting system, over 1b Yuan from the central budget was spent between 1998 and 2005 on the ‘television to every village’ project, accompanied by 2.5b Yuan local spending (China Radio, 2007: 7). After rural television access had shown signs of regression in some places, the central state started in 2006 to underwrite relay stations in prefectural cities and counties. Between 2006 and 2010, 8.2b Yuan from central and local governments was spent (SARFT, 2011). Under the purview of the MOC, a national system of public cultural infrastructure that reaches county (xian) and township (xiang) levels was built between 2002 and 2011. Governmental spending on the cultural system, excluding construction and administrative expenditures, has grown at a yearly 19.3% rate since 2006. Although the fund was only worth 0.36% of the national budgetary expenditure in 2010, at a historically low point since 1978 (Department of Financial, 2011), this and other measures are individually moderate but collectively significant.

As the Sixth Plenary Session of the 17th CPC Central Committee in 2012 stated very explicitly, the ‘fundamental task’ of the cultural system reform is to promote socialist core values, lending political support to state sponsorship of public units. What is less noticed is that public units are also part of market formation. In contrast to the manufacturing industries plagued with overproduction, the culture sector is among the few that arguably haven’t sufficiently met people’s potential demand. However, state regulators also recognize that cultural consumerism faces structural obstacles when the pool of disposable consumer income is limited and stagnating. While advertising-financed media constitute the bulk of cultural infrastructure in China, advertising is ‘neither the sole nor the primary determinant’ of effective demand. Ultimately, consumption hinges upon wages and access to public goods (Caraway, 2011: 696). So, to facilitate China’s transition, the state rediscovers the value of public units in market creation: libraries and museums, for example, can help promote consumption of cultural products and information services, landmark cultural institutions are part of the building of the tourist industry, and the state-subsidized digital film exhibition system for underserved rural areas can also help create rural markets through the 15-minute commercials before each screening.

Cultural industry as mainstream

Along with the deliberate policy of renewing public institutions, the parallel cultural industry drive has taken on a life of its own, driven by self-reinforcing change dynamics set off by previous phases of the reform. It aims to further corporatize partially commercialized branches of the cultural system, deepening the market transformation which is far from complete.

As an archetype of contradictory reform results, media groups are, by state definition, public institutions managed as enterprises, involving the participation of commercialized subsidiaries. Subsidiaries, however, continue to be departments of media groups, enjoying independence in editorial, personnel, and financial matters but without independent legal status (Huang, 2000: 650). As a way to dilute public ownership, some media groups sought initial public offerings of their operational assets, but still retain, along with their editorial sections, the upper hand over listed companies. Being ‘acting’ owners on behalf of the state as one of the shareholders, managers in these quasi-corporate institutions still need to privilege non-market obligations for their stakeholders, including the party, the public, and state personnel (Xiao, 1996). Absorbing political pressure and maximizing economic interest, media groups are indeed ‘unities of contradictions’ (Lee et al., 2006: 599). However, the unity neither exists in harmony, nor does it promise stability.

Internal and external market interests have pushed the system for more operational freedom. Overseas investors, among others, have penetrated Chinese media through joint operating agreements. They have sought equity rights as a requisite for legal protection of their de facto established position in the market (Chou, 2003). Likewise, activated domestic market actors, seeking capital expansion, also lobby hard for tearing down non-corporate forms of other media organizations. Beijing Media Corporation Limited, the first media group to go public in Hong Kong in 2004, for example, complained about being unable to spend the capital raised from its initial public offering on buying into other provincial markets or into the broadcasting market (Sainsbury, 2012). Without shedding the public property status, subsidiaries of media groups are not open to acquisitions or mergers, therefore constituting bulwarks against further market expansion.

New media have also changed market structures, and thus have created a change mechanism to the extent that it is no longer possible to live with the planned reform results. In traditional media, thanks to state monopoly over broadcasting outlets, state broadcasters have remained the major providers of content, despite the proliferation of private production companies. Nonetheless, they have faced destabilizing forces from proliferating cable, satellite, and online channels. The broadband internet, mobile broadband networks, and other kinds of new distribution channels have not only created a swelling market demand for programs, but have potentially undercut traditional distribution venues, including radio and television. The Chinese online video industry, for example, had not faced fully fledged competition from ‘an incumbent pay-TV industry already writing fat checks to the content houses’ and thus enjoyed rapid expansion (Stephen, 2010). In recent years, leading online video websites, all run by private or shareholding companies, have sought transition from being a major platform of pirated and user-generated content to legitimate media companies, investing in programming and creating subscription models (Stephen, 2010).

In view of the literal and perceived threats across media segments, the state appears to have no options except to treat market share as a political matter. To sustain the state’s cultural leadership, state cultural enterprises are expected to edge out unruly non-state players; moreover, when political directives as ideological control instruments grow unpopular and ineffective, competitive state enterprises also bring the benefits of ‘economic-financial control’ (Volland, 2012). In 2011, the State Council publicized such an alarmist report, expressing this long-term concern:

For a long time, state-owned cultural institutions were not transformed into corporations, staying outside of the market economy and thus lacking competitiveness and dynamics. This situation has caused huge waste of state-owned cultural assets, which are facing market marginalization. Meanwhile, all sorts of non-state enterprises sprang up, dominating distribution channels and consumption platforms. (Xinhua News, 2012)

The looming ‘crisis’ justifies the ‘skin-shedding’ evolution of already commercialized public entities into fully fledged corporations. As a note of caution, however, the expected political agreement between the state and its corporate foundation does not happen naturally. Its maintenance requires continuous input of political power, economic resources, and personnel energies.

In reaction to the entrenched market imperative and changed power dynamics, the cultural system reform in the 2000s pivots on expanding cultural corporations. It created an accumulation-oriented categorization of culture, setting free ‘operational assets’ (jingying xing zichan) from direct state ownership control and allowing it to form subsidiaries with independent corporate legal status (Zhao YM, 2005: 53). By allowing corporate subsidiaries to be spun off from media groups and in some cases from supervisory government departments, the reform meant to cut state support to the vast majorities of media enterprises and let market vagaries to shake out inefficient players, while allowing those with market power, as capitalistic entities, to achieve further expansion across multiple markets at home and overseas.

However, this reform was soon stalled after 2002, not least because state media resisted. At the end of 2002, public assets still accounted for 73% in the radio, film, and television sector, whereas corporate assets were merely 27% (Zhao, 2004). As commercialized public institutions, state media had enjoyed unique privileges, receiving state subsidies, making advertising-based profits, and giving their staff better pension and income benefits. To shun the imposed corporate reform, many state publishing houses and newspapers, for example, wanted to keep their public status. However, in the culture sector as a whole, industrial development on the basis of corporate formation went headlong. Between 2004 and 2008, corporate units increased by 52%, accounting for 97.9% of all registered legal units, in contrast with public units as an abysmal portion of 0.8% (Bureau of Statistics, 2010).

After 2008, in a defensive move to sustain China’s economy, the state imposed a timeline to complete a wholesale corporate transition in publishing, distribution, film and TV production, performance, broadcasting networks, news websites, and non-news newspapers. In 2009, the GAPP demanded that local publishers transform into enterprises by the end of the year and those affiliated with central government agencies by the end of 2010. Non-political newspapers, including evening newspapers and metro papers within major party organs, were required to shed their public status and to form press enterprises by 2012. The MOC, likewise, required central-level arts and performance organizations to speed up corporate reforms, planning to ensure a more comprehensive implementation after 2010. The actual reform roll-out did not follow a cookie-cutter approach, but has fostered various local models and allowed for differentiated treatments for various industries.

The wholesale corporate transformation was accompanied by a deliberate industry-boosting policy. In 2009, the State Council released rescue plans for ten industries, including the ‘Plan for Boosting the Culture Industry’. The Twelfth Five-Year Plan (2011–15), then, sets the goal of turning the cultural industry into a ‘pillar’ industry. The Sixth Plenary Session of the 17th CPC Central Committee in 2012 and the publication of the ‘Decision of the CPC Central Committee on Major Issues Pertaining to Deepening Reform of the Cultural System and Promoting the Great Development and Flourishing of Socialist Culture’ further marked the beginning of an intensive policy-facilitated expansionist period, especially for seven designated industries: film and television production, publishing and distribution, copying and printing, performance and entertainment, and digital content and animation. Newly emerging industries, such as cultural creative industries, digital publication, mobile multimedia, and animation and gaming, also gained state encouragement.

Interplays between corporate development and public service in the media sector

The cultural system reform in the 2000s has instigated two poles of development: public service and corporate expansion. Driven by state policies as well as decentralized market dynamics, corporate expansion as a movement is much more grandiose than the rebuilding of public service units. However, state intervention in the name of public service has proved indispensable for the headlong corporate reform in commercially successful sectors. The following section revisits the reform histories of film and TV broadcasting to illustrate how these two poles of development interact.

Film industry

Despite market reform, state film studios in the 1990s could still hang on to the old patterns of operation, including dependence on declining state budgets, orientation towards winning state honoraries, and stringent personnel arrangements (Zhou, 2000). Criticized for its conservatism up to 2003, the film industry became the most determined to reform owing to global structural constraints imposed by the World Trade Organization (WTO) (Cui, 2006). To preempt likely market defeats, the SARFT issued a decree, as early as 2000, to experiment with shareholding reform in state-owned film production companies, by seeking state investors outside the SARFT jurisdiction. An accumulation-oriented production ethos was thus being instituted. In 2002, private companies were allowed to film independently (Kolesnikov-Jessop, 2009). Since then, private companies have driven commercialized film production, spearheading the practices of branding and marketing. In 2004, in the spirit of creating a nation with ‘film power’, the state permitted foreign-invested joint ventures in film production. Although the state later backtracked on the original foreign capital liberalization ruling, foreign investors were still encouraged to invest in individual movies (Feuilherade, 2006). Co-financing and co-production, thereafter, became a legitimate approach to make ‘local’ blockbusters.

Meanwhile, market-oriented domestic cinema chains have exerted coercive market discipline on film production. In 2000, to reduce administrative obstacles against free flow of films as commodities, the SARFT along with the MOC implemented a cinema chain exhibition system as another major move of industrial development. The formation of this dominant distribution channel was justified to ‘provide outlets for domestic films that would otherwise go into the warehouse after production’ (Sun, 2004). However, the promised wider access to audiences only held up for big-budget movies. Out of the annual output of over 500 Chinese movies, nearly 85–90% were medium- or small-size productions, with budgets less than 15m Yuan; most of them could hardly gain access to cinema chains and faced exclusion from capital-intensive media publicity (Wang, 2011). The Piano in a Factory, a rarely seen and critically acclaimed movie on working-class lives released in 2010, for example, suffered such neglect. Likewise, the majority of children’s movies, targeting a niche market with limited purchasing power, remain invisible to the public owing to ‘poor distribution’ (Yun, 2011).

The market-oriented reconfiguration of distribution has produced spatial and social biases. In the 1990s, the rural film distribution system, hitherto organized by county-level cinema companies, withered and even disbanded after county-level cinema companies lost institutional ties with provincial/municipal companies and became ‘equal’ market players, independently underwriting their own procurement and sales (Zeng, 2006). The cinema chain system instituted in the 2000s further discriminates against rural and interior areas when commercially unattractive theater chains or theaters receive fewer copies (Li, 2004).

In 2004, with fiscal incentives from the state, powerful cinema chains had initiated a rapid digital upgrade. As the number of digital screens rocketed by 156% from 2009, China became the largest non-US market for Imax’s big screens in 2010 (New Zealand Herald, 2010). The capital-intensive technical upgrade makes urban cinema chains ever more important, earning over five times as much box office revenue as the combination of rural and second-tier urban markets in 2007, up from less than four times in 2005 (Chinese Film Distribution et al., 2008). In 2009, eight mega-cities generated 80% of China’s box office revenue, whereas the vast numbers of small and medium cities, not to mention the countryside, failed to constitute much market power (Yin, 2010). Built on the assumption that different areas and populations are equal consumers with the same endowment, the cinema chain exhibition system has in itself constituted a barrier towards market integration.

The segregated domestic market makes internationalism one crucial outlet for market expansion. The film industry was among the first in the media sector to ‘accommodate an increasingly transnational commercial structure’ (Zhao and Schiller, 2001: 144). However, up to 2011, no major Hollywood studio had long-term partnerships with Chinese companies to co-produce films (Fritz and Horn, 2011). This situation has started to change. As part of the revitalized cultural system reform in the post-2008 era, the State Council, in 2010, proposed to ‘strenuously promote the leapfrog of the Chinese film industry and to achieve a historical transition from being big to strong’ (General Office, 2010). While continuing to make a contradictory synthesis between nation-centric and global modes of accumulation, the state has noticeably tilted towards the latter. In 2011, a slew of state-endorsed tie-ups with Hollywood studios took place, including Dreamworks, Legendary, and Relativity Media (Coonan, 2011). These projects are meant not only to combine Hollywood’s creative expertise with Chinese market power but also to capitalize on China’s historical heritage and cultural mythology to make big-budget China-themed movies for worldwide audiences (New Zealand Herald, 2011).

Domestic capital has a high stake in such a transition. Among many reasons is the industrial dependence on big-budget movies for profitability, which becomes a dilemma when the size of the domestic market can only reward a couple of blockbuster movies. Receiving hot money from real estate and other businesses, leading Chinese production companies have had abundant capital (Chow, 2011), but lack profitable projects for investment. Exportation, therefore, becomes important to keep the growing film industry afloat. However, China’s soft power in film exportation is nearly absent without western production and marketing capacities. In 2010, 46 out of 47 exported domestic movies were co-produced films (Italian, 2011). So, the go-out campaign, via strategic alliances with Hollywood studios, is as much about cracking open China’s great cultural wall as about dissolving the domestic profitability crisis.

Driven by upscale theaters and big-budget co-productions, the film industry grew 36% between 2000 and 2012, twice as fast as the cultural industry as a whole at 17% (Huang, 2011). By the end of 2009, the corporate and shareholding reform of state-owned institutions in film production, distribution, and exhibition picked up speed, fortifying the accumulation imperative of the whole film industry. If internationalism is one approach of market development, the SARFT nonetheless has to attend to the underserved rural areas. Drawing upon local budgets and by purchasing ‘public interest copyright movies’, the central state spent 600m Yuan (approximately $100m) between 2006 and 2010 on the rural film exhibition system in central and western provinces, hoping to establish a secondary market (SARFT, 2010). To build a rural broadcasting and film public service system, the SARFT after 2008 has also sought to include the expenditure in the national budgetary planning. Film overproduction relative to the underdeveloped domestic consumption capacity makes such a public service mechanism prescient for future market development.

Digital TV

State media at various levels succeeded in packaging audiences as a commodity for sale in the 1990s. However, anticipating insatiable demand for digital content and concerned about the unsustainable advertising-dependent model, state media have pursued further corporatization to position themselves favorably in the digital age. After the 16th Party Congress in 2002, the state renewed the reform in the broadcasting systems. Xu Guangchun, Director of the SARFT, stated that except for advertising revenue, the media industry was still under-commercialized; therefore, the next step was to develop new commercial components, including pay television, pay radio, content production, and program sales (China Radio, 2003: 7). Indeed, although having enjoyed the advertising boom in the 1990s, TV stations did not strictly enforce cost control, sales targets, or efficiency goals in program production. Nor did cable networks generate commercial businesses yet (China Radio, 2004: 17). As a network-based cultural industry had already become a new growth opportunity in the global capitalist economy, the SARFT identified content sales and network services as the two new poles of market development for TV broadcasting in the digital age.

Commercialization started with the cable network, which faced fewer ideological obstacles than content production. During the Tenth Five-Year Plan period (2001–5), the state enforced a complete digital switch-over of cable networks, a prerequisite for creating a user base and for raising fees (China Radio, 2004: 14). As digitalized cable networks were slated to become a marketplace trading content commodities, network interconnection on the basis of a shareholding corporate reform was also implemented in order to create competitive advantage in terms of scale over wired and wireless IP networks controlled by telecom operators as well as to reduce costly barriers for content providers (Chao, 2004). In 2004, the China Broadcasting Network (CBN) was established, from which all TV stations should rent lines. After failing to secure provincial cable network assets due to local disputes over asset valuation, however, CBN was merged into China Cable Television Network in 2005, which still ‘possessed little of the estimated 3 million km of cable running the backbone network into homes’ (Wu, 2005). In 2005, China Central Television took over the struggling company, claiming jurisdiction over communication networks.

Along with the attempts at network digitalization, integration, and corporatization, state media initiated internal reorganizations, aiming to build up a value chain for the multi-platform digital era. In a gradual way, the reorganization campaign delegated program production, acquisition, and operation to channel-based units which then each enforced ‘cost reduction, revenue expansion, personnel downsizing’ and channel branding (Zhao HY, 2005). Non-news channels were then experimentally allowed to be managed as enterprises and even to absorb societal capital (Zhang, 2004). In 2002, the first batch of pay-TV channels was created, the number of which grew to 136 in 2007 (Zhou, 2007). By 2005, channels for sports, transportation, film, entertainment, music, life, finance, and science and education were allowed to spin off to subsidiaries on the condition that channels were not publicly listed, rented, or transferred. With the proliferation of quasi-corporate channel units, it is likely that the commercial ethos, rather than the public service principle, further penetrated the whole broadcasting system.

Under the auspices of state-owned media conglomerates synergizing movie, TV and radio production, non-news productions of TV drama, entertainment programs, and social service were also encouraged to form corporate subsidiaries and to make sales to wider markets. To socialize production, the state had encouraged the separation of program production from broadcasting in 2000, allowing non-news content production departments to operate as enterprises. In 2009, after years of stalemate, such separation started again in sub-provincial TV stations and above, spearheaded by Shanghai Media Group. Li Ruigang, then chairman and chief executive, anticipated that state-owned media groups would become holding companies, leading relatively autonomous satellite subsidiaries producing and marketing a wide range of cultural content inside the country and outside (Barboza, 2009). Noticeably, despite the drive to divest and corporatize, the state retains the public status of TV and radio stations that remain integral instruments of the cultural security defense.

As in the film market, commercialization implemented as such has faced its own contradictions, making state intervention in the name of public service indispensable. As digital technology drastically proliferates channels available to cable users, the state has banned commercials on pay-TV channels to prevent excessive competition for the limited pool of advertising revenue. Based on high subscription fees, pay-TV however significantly fell behind schedule in audience development. In view of the below-par audience size, corporate pay channels held back content acquisition, worsening the situation when the advertising-driven public television sector had already provided abundant content. ‘Free TV is like a river lying in front of pay-TV’ said President of CCTV’s digital television unit (Dickie, 2004). Socially regressive proposals to downsize the public television sector so as to clear the way for pay-TV simmered (Gao, 2004).

In view of the faltering business model of pay-TV, the SARFT re-enacted the ‘public service’ concept. SARFT Deputy Director Zhang Haitao acknowledged that pay-TV was ‘erroneously’ designated as the only propelling force of digitalization (Cao, 2004). In making amendments, the SARFT latched digital TV onto the national informationization bandwagon to gain government subsidy and policy support. The Eleventh Five-Year Plan (2006–10) formally set the goal of making digital cable networks a platform for delivering governmental service to the public (Zhang, 2007). Since then, cable TV has had faster revenue growth than advertising growth. Noticeably, after digital cable networks incorporated a public service purpose, the state also required direct-to-home satellite TV broadcasting and digital terrestrial TV to prioritize public service for remote rural areas. Indeed, in the process of digitalizing the broadcasting system, the SARFT, a traditional stronghold of public service principles, both reactively and proactively expands the public service system to unprofitable areas by utilizing some new digital technologies (Huang A, 2012).

In the post-crisis era, broadcasters’ competition with telecom operators over whose networks should constitute the backbone of China’s information super highway has continued (Zhao, 2000a). In 2012, the Ministry of Industry and Information Technology, through its trade journal, abandoned its earlier market fundamentalist advocacy for a corporate-centric mode of system development, instead choosing to define the broadband internet development under its jurisdiction as a national strategy, and therefore lobbying for systematic state support. However, as telecom operators have spearheaded the business of commodified networks and priced information since the 1990s, the proposition that, in the convergence age, ‘digital television might broaden the public service concept to embrace the broadband Internet’ is still an unwarranted optimism in China (Starks, 2011: 190).

Discussion and conclusion

At the end of the first decade of the 21st century, China is at a crossroad, facing structural pressure to adjust its developmental strategy in a global capitalist crisis economy. Within the state’s arsenal, the culture sector has become a pivotal arena to facilitate the desired transition to a domestic demand-driven growth with an expanded service industry. If the cultural system reform in the 1980s and 1990s was peripheral and sluggish, in the 21st century it has become a central part of China’s unswerving reform and noticeably gained velocity after 2008. Aiming to build up a cultural market economy, the reform is transforming the majority of cultural institutions into state-owned and even state-controlled shareholding corporations, while strengthening the public service obligation of state financing in a few non-profitable areas. By chronicling and contextualizing reform efforts, this article not only documents some major lines of market development but also examines why and how the state is realigning its public and corporate sectors in such a particular mode of synthesis.

In the 2000s, the state rediscovered the value of public cultural institutions, making systematic efforts to reconstruct its ruined public service functionalities. To form a nationwide public service network, a slew of institutions, such as libraries, museums, grassroots cultural palaces, and so forth, have received larger state budgetary supports. They constitute a de-commercialized infrastructure to combat the undemocratic effects of the market. Increasingly, Chinese ruling elites and even leftist intellectuals came to agreement that what makes a country socialist is not the ownership nature of the economy, but that the government taxes the surplus value and uses the proceeds to benefit the people through social programs (Kotz, 2007: 61). The state’s retreat from public services has not only discredited the socialist claim but also undercut China’s ability to shift the economic driver from export manufacturing to domestic consumption.

In view of the shifting orientation of the cultural system at various levels towards market ideologies and accumulation imperatives, it is however too early to proclaim the state is transforming from an ‘economic construction oriented government’ to a ‘public service-oriented government’ (Hu, 2009; Li et al., 2012). The cultural system reform has epitomized the state’s embedded participation in market creation. In the 1990s, core cultural institutions, managed as business-oriented enterprises, were marketized branches of the public service-oriented cultural system. Then, in the 2000s and especially after 2008, ‘a state-controlled capitalist corporate model’ with the state being the majority shareholder of cultural corporations emerged (Huang, 2007: 414). Not only did the state create an accumulation-oriented category of culture, removing its own ideological obstacle against further divesture and corporatization, but has also taken a hardline stance towards resisting state media, ready to underwrite the costs of corporatization and to provide seed money for newly minted state corporations.

The more determined push for divesture and corporatization in the 2000s was meant, for both political and economic concerns, to unleash state-owned market players from the hierarchically organized public service system so as to claim a potentially explosive cultural market. In defense against economic slowdown in the post-2008 crisis context, it was an action of expediency to ramp up such a new growth outlet. Through permitting decentralization, divesture and corporatization of selected branches of the cultural system, the state has scaled up market transactions, deepened market principles, created a growing array of state enterprises and taken actions to adapt to the new multimedia era.

Instrumental for the Chinese state capitalism now extended to the culture sector, the efforts to re-enact public service help trigger conditions of accumulation and underpin the headlong corporation-driven market development. As we saw, pushing public cultural assets into the corporate arena unleashes market dynamics in the short term, but in the long run faces its own limits attributable to rising inequalities in the society. Although policy makers use people’s unmet cultural demand to justify speeded-up market transactions, demand constraints have been felt in the capital-intensive film industry. Likewise, the limited pool of advertising revenue is forcing the digital TV industry to seek new business models and alternative revenues. This is not to deny that underserved populations and regions also pose straightforward political threats to the cultural security mandate. In such destabilizing situations as digitalization, globalization and social fragmentation, the public service concept has thus been invoked to justify state financing even in commercially viable markets—to subsidize public consumption in some cases and to underwrite corporate expenditures in others. Thus, as one of the two faces of the cultural system reform, public service—meant to ‘de-commercialize’ cultural production and provision in selected areas—is important for understanding how the embedded interactions between the state and market forces create and sustain conditions of capital accumulation. Looking ahead, it is an open question, however, when and under what circumstances the newly found equilibrium of public–corporate coexistence will come to end.

Footnotes

Acknowledgements

The author wants to thank Prof. Dal Yong Jin and Prof. Nissim Otmazgin for commenting on early drafts of this paper.

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Notes

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