The Chinese government's control over the Internet could get even tighter, with regulators floating a proposal for the state to take 1% stakes in major Chinese Internet companies, according to people familiar with the matter.

Under the proposal, for which China's Internet and media regulators have been soliciting companies' opinions, the government also would take a board seat at companies where it buys such "special management shares," the people say, giving it more direct influence over company policies on content and censorship.

Companies that could be affected fall under the oversight of Cyberspace Administration of China and State Administration of Press, Publication, Radio, Film and Television. They include Tencent Holdings Ltd., Baidu Inc., NetEase Inc. and almost all big online media companies.

The regulators and Tencent didn't respond to requests for comment. Baidu and NetEase declined to comment.

The proposal is vague and may not materialize, the people familiar with the matter say. Any such move would face a host of complexities, not least that many Chinese companies are listed on stock exchanges elsewhere, so could face resistance from exchange operators, regulators or other investors. The source and vehicle for funds to purchase such stakes also isn't decided yet, according to one person familiar with the matter. One possibility is for state-owned media companies to invest in Internet companies.

Even if it fizzles, the existence of such a proposal suggests even greater ambition for control among authorities who already heavily censor Chinese online companies. Companies already are required to censor themselves, an effort that can include hundreds of employees monitoring and deleting content that the state may find offensive. But some sites occasionally test the boundaries, publishing first and apologizing later.

The proposal has emerged as the government further restricts Internet content, particularly from Western companies. The recent moves extend an online crackdown campaign begun after Xi Jinping assumed the presidency in March 2013, which has included shutting many websites and silencing critical social-media bloggers.

According to GreatFire.org, which tracks online censorship in China, 21% of over 400,000 of domains, Web links, social-media searches and IP addresses that it monitors in China are blocked as of Wednesday.

Just in the past month, the website of Britain's publication, the Economist, was blocked soon after it published an April 2 cover story critical of President Xi. References in social media to the so-called "Panama Papers," which allegedly documented offshore holdings by world leaders from countries including China, were censored. One civil-rights lawyer was detained for posting social media messages about the documents.

Last week, China shut down Apple Inc.'s online book and movie services in the country, using new rules that ban companies with any foreign ownership from publishing online. This week, regulators effectively suspended a partnership between Alibaba Group Holding Ltd. and Walt Disney Co. that was intended to bring Disney characters to Chinese screens. The moves were notable because Apple and Disney have thrived in China, facing few of the restraints that have bedeviled other Western companies.

​The Chinese government's management of the Internet calls to mind the 1998 Jim Carrey movie "The Truman Show," which is popular in China. Like Truman, who unknowingly lives in a constructed reality-television show for 30 years, many Chinese aren't aware that they live their Internet lives in a fabricated, and heavily censored, online world.

And as in Truman's world, what's on the Chinese Internet is as important as what's been edited out. To the untrained eye, the Chinese Web appears to offer an abundance of content and services.

WeChat allows users to call a cab, pay utility bills and book hospital appointments. Ecommerce websites are full of deals. Investors are piling into online-content startups, covering everything from entertainment to sports and games. Many talented people are creating funny, smart content, and investors are chasing after these talents.

"In China today, the problem isn't scarcity but abundance. There're all kinds of information, but you don't know what you're missing," says Chan Koonchung, a Hong Kong writer who's been living in Beijing since 2000. In his 2009 science-fiction novel "The Fat Years," he foresaw China in 2013 as a country that was silenced. "Unfortunately, it turned into reality," he says. "The Fat Years," published in both Taiwan and Hong Kong, is banned in mainland China.

The paradox reflects how the government wants the Internet to succeed, but only on terms that the government can control.

Last month, Papi Jiang, a 29-year-old online video personality, raised 12 million yuan ($1.9 million) from a group of investors. Her squeaky-voiced monologues talk about relationships, social pressure and other concerns of China's urban young women.

For a few weeks, she became the symbol of China's online content cornucopia. Then last week, her videos were removed from some websites because of their use of expletives, according to a state media report. She issued an apology on Weibo, where she has 12 million followers.

"I will pay more attention to my words and images," she wrote. "[I will] respond positively to the requirements on online videos and send positive energy to the public."

Also last week, President Xi presided over a symposium on the development of Internet, suggesting that cyberspace be "imbued with positive energy and mainstream values."​

 

(END) Dow Jones Newswires

April 27, 2016 15:15 ET (19:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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