downloads.jpg[UPDATED] Just as China opens its financial sector to foreigners, it is closing the door on western firms in the lucrative market for financial information.

That's the International Herald Tribune's interpretation of new rules that require foreign news agencies to conduct business in China through Xinhua, the official news agency.

The IHT's spin on this is that Xinhua is out to stifle competition by preventing foreign news agencies selling direct to clients in China.

It argues that the worst hit will be those who specialise in high-value financial data and information such as Bloomberg, Reuters and Dow Jones.

Now this is a market Xinhua eagerly covets, but it is an area where Xinhua is widely acknowledged to be inferior to the western competitors — see earlier EngagingChina post for profile of Xinhua Finance.

Most controversially, the new rules would allow China's officials to slow and even restrict the flow of information, the IHT argues.

Now, anything which smacks of media censorship is like a red rag to the bull for western journalists, hence the barely concealed outrage that shows in reporting of this story.

But even if the story is true, I wonder just how effective this idea of controlling financial news would work in practice.

Financial information has little value if its delivered late or incomplete, and if the authorised stuff is no good, it is going to be difficult to stop traders in dealing rooms in Shanghai getting better information from “unauthorised” channels — via their firm's global intranet or from foreign websites, for example.

Censoring this sort of information is difficult. Unlike “hot button” topics like human rights or Tibet, financial information is pretty dry and, out of context, meaningless — how do you censor a stream of numbers?

Ultimately, China would be shooting itself in the foot if it clamped down on foreign financial information providers. Financial trading transcends national boundaries, so if financial firms believe the information they get inside China is unreliable, then they will simply shift business to nearby financial centres where information flows are unrestricted.

That would risk undoing all the progress that has already been made in modernising China's financial sector and opening the market to foreign competitors, both central planks of China's WTO obligations.

UPDATE: the “new rules” are old ones according to the China Law Blog and nothing really has changed. That's alright then. Just goes to show the difficulties that westerners — and not a few Chinese — have trying to interpret China's regulations and laws.

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