China to lift ban on state-owned firms buying Bloomberg terminals, source says
Move intended as goodwill gesture to foreign investors
China is about to lift a ban on its state-owned enterprises buying terminals from Bloomberg as a goodwill gesture to foreign investors and a signal that Beijing is committed to its opening-up policy, according to a source briefed on the matter.
The authorities hope that by ending the boycott imposed four years ago after the American news agency’s high-profile rift with Beijing, they can deflect growing criticism that China is turning its back on foreign investors. This will also serve as a message that China will stick to its reform direction as the country enters a sensitive year of power reshuffles.
In a similar manner to how it was imposed in 2012, the lifting of the ban comes unannounced and in a low-profile style. Beijing had already started to gradually relax the restriction over the past year, after repeated lobbying efforts by the New York-based company.
The relations warmed noticeably after company founder Michael Bloomberg’s visit to China in August 2015. He was given a high-profile reception by Vice-Premier Zhang Gaoli and published an op-ed piece in the People’s Daily. Sources said the former New York mayor signed a preliminary agreement with the Chinese during the trip to sell terminals to mainland SOEs – including the largest state-owned bank ICBC.
A spokeswoman for Bloomberg said they had “no comment” when asked about Beijing’s decision to lift the ban. “Bloomberg has been operating and investing in the China market for many years and serving a growing number of clients. Our product and people investments in China are long-term,” she added.
The information office of the State Council that supervises foreign financial information providers declined to answer questions on the matter.
Sources said in April, Bloomberg’s China sales team celebrated a “milestone” after it recorded a net installation of more than 300 terminals in China in the first quarter. There are now more than 5,500 Bloomberg terminals in China – up from 3,000 four years ago when Beijing abruptly blocked the company’s news website and banned state-owned firms from buying its terminals. The monthly subscription for each Bloomberg machine is US$1,830 and subject to 8 per cent tax in mainland China, so nearly US$2,000 per month.
China never explained the ban but it came shortly after the agency published a story on June 29, 2012, about the finances of the extended family of Xi Jinping – then the vice-president. It came at a sensitive time as China held a once-a-decade leadership transition that eventually saw Xi becoming the president.
Chinese companies were first told to put on hold any plan to acquire new Bloomberg terminals. Shortly afterwards, they were told not to buy or use Bloomberg machines at all.
Over the course of the following four years, the restrictions start to loosen as many state-owned companies resumed buying Bloomberg terminals. Many complained to the authorities that the ban affected their operations and lobbied to have the decision reversed.
“They say Bloomberg terminals provide better financial data and services than other providers,” the source said.
But for major SOEs directly managed by the State Council, the ban is still in place, at least theoretically.
Beijing is now ready to completely lift the ban and allow those large SOEs to buy from Bloomberg again.
The Bloomberg news website is still blocked on the mainland, although Beijing granted new journalist visas to the company last year. Bloomberg reporters are often picked to ask questions at tightly controlled government press conferences. John Micklethwait – who replaced Matthew Winker as editor-in-chief in 2015 – interviewed Chinese Vice-President Li Yuanchao in January in Davos.
Beijing’s breach with Bloomberg in 2012 was watched by foreign investors with alarm and concern, particularly as complaints grew about a deteriorating investment environment for foreign businesses in China. The American financial data company’s experience also highlighted the hard choice for foreign business operating in the country – the market is too big to ignore but the price to gain access to it can be dear.
Google opted to stay out of the mainland market because it refused to conform to the government’s censorship policies. However, in January, The Atlantic reported that the company “plans to return to China in the near future”. Facebook’s Mark Zuckerberg has tried to charm Chinese leaders on various occasions, yet Facebook is still blocked on the mainland.
For Beijing, while those in security branches largely see the operations of these foreign companies as a threat to national interests and security, economic planners believe China’s future is irreversibly intertwined with the global economy. Chinese leaders have repeatedly pledged to open the domestic market further to foreign competition. Indeed, a key message delivered by Xi at the Group of 20 summit in Hangzhou was to champion free trade and globalisation.
The 5,500 Bloomberg terminals in China represent only a fraction of its 325,000 globally installed terminals, but China is identified as a fast-growing and crucial market.
After the ban, the company withheld an investigative report about Wang Jianlin, the chairman of the Dalian Wanda Group and the one of the wealthiest tycoons well connected with Chinese leaders, in 2013, according to a report by The New York Times. Michael Forsythe, the key author of the investigative reports, left the company shortly afterwards. Bloomberg has never admitted the practice of self-censorship.
Peter Grauer, the then Bloomberg chairman, said in Hong Kong in March 2014 that China is an important part of the company’s long-term strategy and there are stories that “we should have rethought”.
Bloomberg’s website is still blocked in China, along with some other foreign media, including The New York Times, The Wall Street Journal, Reuters, The Economist and the South China Morning Post.