Tuesday was the 30th anniversary of the Tiananmen Square massacre, when China on June 4, 1989, sent troops and tanks in to disperse pro-democracy student demonstrations. The troops killed hundreds, probably thousands, of young kids to reclaim Beijing's central square. But you wouldn't know that in China.
Mentions of Tiananmen Square, June 4, and even the numbers "46" and "64" -- short for "4-6" and "6-4," or references to June 4 -- are studiously censored on the mainland. Companies that want to do business in China also have mounting pressure on them to do the Communist Party's bidding in suppressing controversial content, making them active participants in this egregious editing of history.
One of the most bizarre examples of this behavior came at this anniversary. Reuters news articles on the 30th anniversary were censored on what's basically a Reuters terminal, the equivalent of a Bloomberg machine used by investors to track stock data, regulatory filings and what's going on in the world.
The Eikon service -- Bloomberg's main rival in financial data -- refused to carry Reuters stories about Tiananmen Square starting last week, even though Reuters created Eikon and still gets the lion's share of its news revenue from selling its stories into Eikon. But after a botched rollout of the service (Eikon and Bloomberg are now online, not in physical terminals), Reuters last year spun out a 55% stake in its Financial & Risk unit that owns Eikon to a group led by the Blackstone Group (BX) , the world's largest private-equity company.
Reuters News has a 30-year contract to provide news to Eikon and Refinitiv, which in turn pays Reuters at least $325 million per year. That makes Refinitiv the largest customer for Reuters News, a subsidiary of Thomson Reuters (TRI) . But Reuters, with a Web site already blocked in China since 2015, found its own stories censored out of its own platform, and then found itself reporting about that news. About itself.
What does this mean for investors? Obviously, it means that if you happen to find yourself in China, you can't trust the news. Even the investment news.
But it increasingly means you can't trust the news about China that appears outside of China either. Refinitiv said it initially intended only to censor the Tiananmen stories within China, but many users outside of China couldn't see the stories, either. Refinitiv provided no notice about this censorship on the Eikon terminal, so you wouldn't know the stories were missing unless you were looking for them.
There are people looking for them on this important anniversary. Organizers say 180,000 people turned out for a memorial service in Hong Kong's Victoria Park, covering six football fields. But for run-of-the-mill stories including corporate news as well as material the Communist Party might prefer you did not know, no one would know the news stories were missing.
They're Only Following Orders
Refinitiv trotted out the excuse that it was merely playing by the rules.
"Refinitiv is a financial-markets news and data provider in China. We are proud of the role we play in the world to facilitate transparent and efficient financial markets," it told Reuters in an e-mail statement. "As a global business, we comply with all our local regulatory obligations, including the requirements of our license to operate in China."
In November, the Cyberspace Administration of China that controls online speech put out harsher rules to squash material that the government does not like. It said that both platforms and individual people can be punished for "falsifying the history of the Communist Party."
With Tuesday's Tiananmen massacre anniversary, the Cyberspace Administration threatened to suspend Eikon service in China if Refinitiv did not censor the articles, Reuters said, quoting inside sources.
China, under President Xi Jinping, is getting tougher and tougher on dissenting speech and increasingly is imposing its controls over companies. At one point, Xi himself called Alibaba Group Holdings (BABA) co-founder Jack Ma and Tencent Holdings (TCEHY) co-founder Pony Ma (who are not related) to a little get-together. Xi reminded them that their companies, while very powerful, operate at the permission of the Communist Party, so they better not get too many ideas about who's really in charge.
So there is something to the ongoing feud between the United States and Huawei Technologies. It handily illustrates the dilemma posed by doing business with Chinese companies, or investing in them.
Huawei is a bona fide private business, not a state-owned enterprise. But as a telecom equipment supplier, it operates under multiple Chinese government licenses and has multiple contracts with the Chinese government. I have no doubts that it would provide whatever data the Communist Party demanded to said party if requested. It would trot out similar excuses as Refinitiv, that it is just complying with the rules.
The State's Nose in the Corporate Tent
The line is even blurrier with companies that are actually owned by the Chinese state. What's more, the Communist Party in 2017 started writing itself into the articles of association of many of China's biggest companies, describing the party as being at the core of the company. The huge oil company China Petroleum & Chemical Corp. (SNP) , known as Sinopec, as well as the world's largest bank by assets, Industrial and Commerce Bank of China (IDCBY) , changed their company "constitutions" in this way.
Such large companies have a Communist Party unit within the company, "advising" on operations. China Railway Group (CRWOY) , which despite its name is actually one of China's biggest construction companies, wrote into its articles of association that "when the board of directors decides on material issues, it shall first listen to the opinions of the party committee of the company."
China Railway Group is one of the main beneficiaries of China's One Belt, One Road project of overseas infrastructure projects. Part of the scheme involves building new rail connections from China and from Southeast Asia through Central Asia and Central Europe to the West.
Hong Kong is a bastion of free speech, where brokerages and analysts are able to run critical commentary of such state-owned companies. It is a good question what Refinitiv will do on Eikon if the Chinese state starts insisting that the data company not carry articles critical of corporate strategy, or the blurred lines between the Chinese state, China Railway Group and the Belt and Road projects.
Hong Kong may not retain that free-speech position for long. As I explained in late May, there's a new law in the works to allow extradition from Hong Kong into China, so alleged criminals can be prosecuted under Chinese law. The crimes have to be crimes in both places, but that's easy enough to concoct.
I can tell you already that there is plenty of self-censorship within the news in Hong Kong. I write what I feel investors need to know in this column, but in my other dealings with news outlets in Hong Kong, I sometimes hear that an article idea is too "controversial" or "touchy" because the Chinese government wouldn't like it.
David Webb, Hong Kong's best-known shareholder activist, has called the Extradition Bill "the gravest threat to Hong Kong's autonomy" since an attempt at passing an anti-subversion law in 2003.
He recommends that investors take to the streets in protests at a mass march against the Extradition Bill this Sunday. Organizers estimate 300,000 attended an earlier march last month. There will likely be many more people protesting on Sunday.
Reuters, I'm sure, will report on the protest. But comically, Chinese news reports about the Umbrella Revolution protests in 2014 in Hong Kong occasionally described the protests (when they mentioned them at all), as disruptions to traffic and bus service.
So, you won't read about Tiananmen Square on the Reuters service in China, and you probably won't read about Sunday's demonstration on Eikon inside of China, either. And increasingly, you won't read such unfiltered news about China outside of China on any investment-data service that does business there if they want to continue to provide that service.
(This column has been updated.)