The South China Morning Post's China Play

Preceding the naming of its first mainland editor, Wang Xiangwei, the South China Morning Post's 33-year old chief executive officer Kuok Hui-kwong, daughter of tycoon Robert Kuok, was granted a rare one-on-one audience in Beijing with Wang Guangya, the director of the Hong Kong and Macau Affairs Office.

That has sent a chill through Hong Kong’s media watchers. Apple Daily. the feisty and fiercely independent local Chinese newspaper declared that SCMP has "gone red." The free English language Standard headlined its report “A Paper that’s well Red.”

The South China Morning Post has been the reference point for political reporting on China and business analysis of Hong Kong for more than a century. It is the oldest continuously published newspaper in Hong Kong and all of China. International political observers and businessmen trust its content and follow its analyses and editorial columns.

The SCMP has been allowed to establish news bureaus in Beijing and Shanghai which Hong Kong’s Chinese language press is denied. That, together with personalities like its new editor Wang Xiangwei gives it a strong edge on mainland reporting and reinforces its leadership position on China content.

It has an insider view, not a foreign perspective on China. That is a double-edged sword which makes Beijing uncomfortable and heightens its need to influence the paper even more closely.

Wilted share price

The company's revenues and share price indicate it badly needs a new direction. The HK$8 per share which Robert Kuok paid to News Corporation in October 1993 stands now at HK$1.37. The annual revenue the company records today is less than the after-tax profit the SCMP achieved in the late 1980s to early 1990s. Its dominant classified advertising revenues have been hit by internet job sites and the change in the Stock Exchange rules on compulsory publishing of company half-year results. The loss in annual advertising income has been dramatic with no sign of a comeback.

The financial report for the first half of 2011 records SCMP Group revenue at HK$443.5 million, an 8 percent improvement over the same period 2010 on a record number of IPOs promoting their listings. Group revenue was HK$1.9 billion in 2001.

The SCMP may now hope for mainland-access rights to print and publish for the growing international communities in Guangzhou, Shanghai and Beijing. Business is business: perhaps Wang Xiangwei is a necessary trade. Whether the paper would lose its credibility along with that devil’s bargain, waits to be seen. The SCMP is on notice. If it becomes another China Daily, it will have no reason to exist for Hong Kong or China readers.

The inordinately long time it took -- 10 months -- to keep Cliff Buddle as acting editor and hold Wang Xiangwei in his deputy editor rank may be an indication of the horse-trading between the Kuoks and Beijing before the final elevation of Wang to SCMP editorship. Much is at stake on both sides. The direction may well start to emerge when Wang starts to pick his own deputies. Tammy Tam, one of his two senior deputies, is known to be close to the Central Liaison Office and the Hong Kong-Macau Affairs Office although her defenders say she is not considered to be an apologist for Beijing.

From an investor standpoint, the failure to gain China entry for the paper has been the Kuoks' greatest disappointment. There is controlled distribution to subscribers through the monopoly national imported publications distributor in China. That is expensive, inefficient and arrives late to readers. There is no retail presence or promotion allowed. The slide in the share price from 1993 reflects that. By the same token, domestic morning distribution and retail sales to the international community in China would boost its share price. It would have a growth story.

Media encirclement in Hong Kong

A pattern of media takeovers in Hong Kong is discernable: Mainland interests have acquired Hong Kong’s second free-to-air broadcaster ATV. TVB is now in play with Run Run Shaw out of it. The chief of RTHK, the public broadcaster, was replaced by a civil servant with no media experience. That was followed by a couple of lively talk-show hosts being axed from the airwaves with no explanation. Pro-Beijing politicians in Hong Kong have been vociferous in calling for the government-funded RTHK to ‘correctly’ reflect government propaganda.

The unannounced appearance of the former editor-in-chief of the Straits Times of Singapore in the SCMP newsroom, created expectations of a potential commercial interest. He has let it be known that he is on a 3-month consulting engagement. If SCMP is in play for China entry, that would solve the exit problem for Robert Kuok and give enormous comfort to the mainland authorities.

Singapore Press Holdings, which owns the Straits Times, is cash-rich with nowhere to go. It has the credentials for resolute political content sterilization.

SCMP had a string of China commentators and cartoonists removed over the last decade. It has run through editors at high speed. Much of the tension revolves around its China coverage and the discomfort of the Hong Kong and Macau Affairs Office (HKMAO). The HKMAO is China’s arm to steer the local government and supervise ‘united front’ work at grassroots level.

Chief Executive candidates give no confidence

Hong Kong residents were astounded recently to see both contenders for the 2012 chief executive position, Henry Tang and CY Leung, reporting to the HKMAO while campaigning. Neither candidate has a clearly thought-out political platform. Forced by local media to declare policy platforms, they dribble out positions on public housing, social security and mainland babies, making it up as they go. Or as guided by the HKMAO.

Both candidates have evaded answering two critical issues which bother Hong Kongers: Will the ‘rotten boroughs’ of functional constituencies be dropped for direct elections in 2017? Will the dreaded Article 23 Security Bill be resurrected? Their slippery evasion on these matters is most worrying for Hong Kong residents. It portends an ill wind over the next critical five years.

Is the promise of ‘Hong Kong people running Hong Kong’ finally abandoned? The pair lobbying for CE are unlikely to preserve the territory’s autonomy on the evidence so far. They give every indication of having already capitulated.

Media control critical for opaque regimes

Control of media is a cardinal principle in authoritarian regimes of all political persuasions. Indonesia under Suharto, Malaysia under Mahathir, Singapore under Lee Kuan Yew, Russia under Putin and China under everybody, routinely decides editorial policy. All of them have at various junctures dismissed and imprisoned journalists and shut publications.

The status of the South China Morning Post will be an indicator of which way Hong Kong is headed. Its CEO and editor carry a major responsibility to the community which underpins their business. Kuok Hui-kwong pledged in her 31st January memo to staff that “Powerful, objective and insightful reporting on Hong Kong, China and the region, is clearly a defining part of our future as a news organization.”

It is widely known that the Kuoks have been looking for an exit for years, so that reassurance does not quite ring true. It is corporate-speak to keep journalists from jumping ship, advertisers from reviewing budget allocations and readers from reconsidering subscriptions.

Meanwhile with the growing restiveness between the Hong Kong community and the mainland on so many fronts, Wang Xiangwei will find himself torn between competing loyalties. Ultimately he will have to choose. The cards are well stacked for Beijing to win if not today, tomorrow.