News Corp. Heir Woos China With Show of Support

By EVELYN IRITANI

March 23, 2001 12 AM PT

TIMES STAFF WRITER

In what appeared to some to be a blatant effort to curry favor with China, James Murdoch, heir to the News Corp. media empire, called the Falun Gong spiritual movement a “dangerous” and “apocalyptic cult” and lambasted the Western press for its negative portrayal of that giant Asian nation.

Eight years after his powerful father, Rupert, offended officials in Beijing by proclaiming satellite television a weapon to attack “totalitarian” governments, his 28-year-old son demonstrated in a speech this week in Los Angeles just how far News Corp. is willing to go to make amends.

The elder Murdoch has long viewed China as a critical piece of his global agenda. That nation’s pending entry to the World Trade Organization promises to crack open a telecommunications sector that is already one of the world’s largest and erode tight constraints on an exploding cable and satellite television market.

Speaking at the Milken Institute’s annual business conference in Beverly Hills, the younger Murdoch startled even China’s supporters with his zealous defense of that government’s harsh crackdown on Falun Gong and criticism of Hong Kong democracy supporters.

Falun Gong, also known as Falun Dafa, is a spiritual movement that combines meditation and exercise and was banned by the Chinese government after 10,000 followers staged a protest in Tiananmen Square in 1999.

With his prominent father in the audience, the chairman of News Corp.’s Hong Kong-based Star Group said the spiritual group “clearly does not have the success of China at heart.”

After describing himself as “apolitical,” Murdoch--whose family’s $30-billion corporate empire includes Fox Television, the Dodgers, the New York Post and Star TV, Asia’s largest satellite network--also said Hong Kong democracy advocates should accept the reality of life under a strong-willed “absolutist” government.

And the outspoken chief executive didn’t spare his own employees, accusing the Hong Kong press and Western newsmagazines of painting a falsely negative portrayal of China through their focus on controversial issues such as human rights and Taiwan.

“I think these destabilizing forces today are very, very dangerous for the Chinese government,” he said.

Even those who share Murdoch’s sentiments that China’s complex political and economic landscape are not well understood abroad were taken aback by his ardent boosterism of the darker side of China’s governance.

At one particularly uncomfortable moment in the discussion, Robert Kapp, president of the U.S. China Business Council, felt it necessary to distance himself from Murdoch’s blanket endorsement of the Chinese government’s record.

“I personally get nailed as being China’s best lobbyist,” said Kapp, who represents this country’s most prominent China business group. “We go to great lengths to explain we are not working for China. We are working for the interests of the American business community.”

In Thursday’s meeting between Chinese Vice Premier Qian Qichen and President Bush, human rights concerns and Taiwan were high on the agenda. The State Department reports that China has jailed thousands of Falun Gong practitioners and at least 100 have died in prison as a result of neglect or torture.

When told of Murdoch’s comments, Patrick Horgan, a Beijing-based technology analyst, said: “I think being a lap dog is something people in certain companies think they have to do but if one can avoid it, one should.”

Mike Jendrzejczyk, Washington director for Human Rights Watch Asia, was far less diplomatic: “It’s quite appalling he would echo both [the Chinese government’s] rhetoric and use the same excuses.”

Murdoch’s provocative performance offered a revealing glimpse of the next generation of News Corp. leadership when the firm is struggling with massive industry consolidation, the collapse of the dot-com bubble and reports that its negotiations to buy the U.S.-based DirecTV Inc. satellite television company have stalled.

Though the founder shows no signs of slowing, his advanced age has kept the succession rumor mill alive for several years. Eldest son Lachlan is the reputed heir apparent. But James, a Harvard dropout, was given the job of heading up the firm’s prominent China initiative just a few years after joining the family company. Their sister, Elisabeth, left News Corp. last year to set up her own media company.

To those familiar with News Corp.’s torturous path into the China market, the younger Murdoch’s comments presented a striking contrast to the fateful remarks uttered by his father. In a speech made shortly after he acquired Star TV in 1993, the elder Murdoch declared satellite television an “unambiguous threat to totalitarian regimes everywhere.”

Within weeks, unhappy Chinese leaders had declared war on Murdoch and pronounced satellite dishes illegal. It wasn’t long before the contrite Australian was paying conciliatory visits to Beijing and bending over backward to satisfy the Chinese government in exchange for access to that nation’s exploding media market. Today, China’s cable and satellite advertising market is worth more than $800 million a year and is growing at 30% annually.

Under pressure from China, he pulled BBC off Star TV and canceled his book division’s plans to publish the memoirs of Chris Patten, the outspoken British governor who oversaw Hong Kong’s return to Chinese rule in 1997.

By pouring more than $1 billion into its Asia holdings, News Corp. has solidified its standing as China’s most prominent foreign media company. Star TV, which offers 30 channels in seven languages, is still losing money but reported strong growth last year thanks to its fast-growing India channel.

News Corp. also owns a 37.6% stake in China’s popular Phoenix Television, a Chinese joint venture, whose broadcasts, along with Star, are viewed in southern China and luxury hotels and foreign compounds in other parts of the country.

But the big payoff for News Corp.’s ardent courtship came this year, when the firm landed a coveted deal that provided early entry to the Chinese telecom market, according to Horgan, of APCO China.

Foreigners are banned from investing in basic telecom services, though China has agreed to allow up to 49% foreign ownership in that sector post-WTO. But in February, News Corp., Goldman Sachs & Co. and two Chinese companies spent $325 million to buy a 12% stake in China Netcom, an aggressive Beijing-based telecommunications provider backed by the son of President Jiang Zemin.

Horgan said picking up a piece of one of China’s major broadband networks was a smart move for News Corp., particularly since China Netcom’s founders also included the powerful State Administration of Radio, Film and Television.

“News Corp. succeeded by virtue of persistence,” Horgan explained. “This is liberalization through the back door.”

In a telling acknowledgment of the “regulation-by-man-rather-than-law” climate that still exists in China’s evolving economy, the government-backed China Daily newspaper praised the deal as “revolutionary” and then acknowledged that the investment was not “entirely legal” under current regulations.

Murdoch said this week he was “excited” to be involved with China Netcom and he insisted the deal had been “drawn up by lawyers and is legal.” But he would not elaborate on how his firm was able to bypass the foreign investment ban.

Reflecting his father’s no-holds-barred business philosophy, the younger Murdoch did warn his Los Angeles audience that investing in China required a “strong stomach.” But he said Chinese officials were very “practical” and “resolutely capitalist” and foreign firms interested in succeeding in China should “push the envelope” of the regulatory apparatus.

“People are going to start piling in quickly,” he said. “The time is very ripe right now.”