HONG KONG SAR - Media
OutReach - 26 July
2021 - Chinese state-owned news media has
long been criticised as being the government's "mouthpiece" due to
its ties to the Chinese government. Many question the value of news reports
they produce because report the information that the government intends to share.
Setting aside this stereotypical image, a recent study finds that in terms of
business news, even state-owned newspapers provide unique and valuable
information to the country's capital markets.
The study found that the more traditional state-owned media and the
newer outlets serve different roles in providing information to financial
markets. (Source: iStock)
All news media in China are more or
less controlled by the government. The government itself directly operates
several official media organisations that espouses the views of the party. The
biggest and most influential include The People's
Daily, the largest newspaper in the country, television broadcaster China
Central Television (CCTV), the news agency Xinhua, English-language daily China Daily and the tabloid Global Times.
However, recent years have seen the
emergence of a new breed of media outlets in the country that appear to operate
with relatively more editorial leeway, such as Caixin, Jiemian.com, and
The Paper. They are still controlled by the state, but have a stronger
profit incentive and are established with a clear mandate to attract and serve
a broader readership. The news articles they publish often appear to be more
critical, and they are seen as being more willing to push the boundaries of
reporting in the country, often covering stories that the largest (and
state-owned) media companies are unwilling to. Consequently, the news coverage
of this new generation of media organisations is generally considered to be
more valuable than the stories published on traditional state-owned media.
However, according to research, this may not actually be the case.
"People often ignore the fact
that state-owned media, thanks to their close links to the government, can
provide 'inside' market news and information that other news media can't,"
comments Tianyu Zhang,
Professor at the School of Accountancy at The Chinese University of Hong Kong
(CUHK) Business School.
His research paper Firm News and Market Views: The Informational Role of
Official Newspapers in China,
co-written with Prof. Joseph Piotroski at Stanford University, Prof. T.J. Wong
at the University of Southern California and PhD student Shubo Zhang at CUHK
Business School, proposes that old guard state-owned media and their more
progressive brethren serve two different roles in providing information to
financial markets. In the study, the authors reviewed nearly 3 million articles
on domestic corporate news from 100 business newspapers in China from 2000 to
Different Informational Roles
Prof. Zhang explains that the more
traditional state-owned media and the newer outlets are different in terms of
acquiring, interpreting and disseminating information and therefore, the two
types of media may serve different roles in providing information to the
Typically, the more progressive news
organisations tend to focus more on firm-specific reporting. This can help them
to gain readers who are interested in inside stories of well-known companies
and earn advertising revenue from firms that perhaps would like to be featured
in the newspapers. In other words, their news articles would lead to an
increase in the supply of information on individual firms, such as the
performance of certain companies and their stock prices.
The more traditional state
newspapers, on the other hand, are well suited to delivering political
directives and policy-related information. Due to their close relationship with
governmental units, these big official rags can provide the most precise policy
direction and industry trends for corporate news. For instance, the study found
that on average, their articles supply 10 percent more news on the general trends
of specific industries and markets than semi-independent business newspaper articles. Furthermore, big state-owned newspapers tend to increase their
coverage on industry and market news on days when the central government
announces new industrial economic policies.
"You must understand that
government policy is fundamental to China's economic growth and investment
opportunities. In other words, it wouldn't hurt to listen to the 'mouthpiece'
sometimes," Prof. Zhang comments.
On the other hand, not all
conventional state-owned newspapers are equal in terms of reporting policy-related
information. According to the study, newspapers owned by the central government
level often contain more information on the broader economy than the same type
of newspapers owned by local governments. The study explains that this
phenomenon shows that newspapers owned by the central government have greater
access to future governmental policy directions, wider readership and they
appeared to have greater credibility.
However, the study found that during
the National Congress of China's Communist Party – a meeting of top officials
which is held every five years and serves to set the country's national policy
goals and to elect its top leadership, both types of newspapers reported an
increase in their output of stories related to the macroeconomy to showcase
their coverage of the country's major political event of the year.
Diverging Editorial Stance
Interestingly, contents reported by
the two types of newspapers diverged further after President Xi Jinping's
high-profile visit to the big three state-owned media – The People's Daily, Xinhua and CCTV – in February 2016. During this
visit, President Xi ordered news media organisations to "follow the Party's
leadership and focus on 'positive reporting'", CCTV reported. The researchers
found that after the visit, more editorially progressive newspapers drastically
reduced the amount of coverage on the overall economic performance of
individual industries and the macroeconomy, whereas the traditional state-owned
news media saw a significant surge in their coverage of this type of
"What we saw was that the old
school state-owned news media organisations aligning themselves with the
overall political and propaganda role that the Party set for them in the
economy, whereas news media with more independent editorial stances were
distancing themselves from this political agenda to focus solely on their
businesses interests," Prof. Zhang explains. "This way, the two types
of news media have different roles in providing different types of information
The research study is the first to
provide evidence that China's different state-owned news media play an important
and complementary role in providing useful information to financial markets.
Prof. Zhang and his co-authors suggest future research can look into the way
that the market reacts to existing biases in the content of official newspaper
articles and whether the market corrects for these known influences.
Joseph D. Piotroski, T.J. Wong, Shubo Zhang and Tianyu
Zhang. (2019) Firm
news and market views:
informational role of official newspapers in China. Working
This article was first published in the China
Business Knowledge (CBK) website by CUHK Business School: https://bit.ly/3i3PPsn.