Investors and Media Chafe At China's News Squeeze

A WEEK after China announced restrictions on foreign media, shock waves are still reverberating through neighboring Hong Kong, prompting politicians and media groups to accuse Beijing of heightening fears about curtailed freedoms already gripping the British colony as it prepares to revert to Chinese rule in 1997.

The decision to restrict and ''monitor'' economic information coming in by the government-controlled news agency, Xinhua, has raised fears that the country's Communist leaders would reimpose controls that they have relaxed since the end of the Cultural Revolution in 1976.

Empowered to determine which Chinese institutions can gain access to foreign economic news, and at what prices, Xinhua also announced it would punish approved foreign vendors whose information ''slanders or jeopardizes China.''

The move was widely seen as a major setback to foreign news organizations, including Reuter Holdings Plc., Dow Jones & Co., and Bloomberg Business News, which have been servicing mainly Chinese banks, trading companies, and securities firms with real-time information, including stock prices, commodity quotes, exchange rates, and statistics, as well as more general news and analysis.

Trade diplomats in Geneva are bewildered by the strictures. Several said the new policy casts doubt on China's commitment to free and open trade and could further hamper its hard-fought bid to join the World Trade Organization.

Brokers in Shanghai and Shenzhen were caught off-guard. Even top Chinese officials like Foreign Trade Minister Yu Wi were surprised.

Promoting 'fair competition'

China's foreign ministry was the first official voice to deny the measures marked a return to the past. ''This new administrative policy will by no means influence China's reform.... It was designed to promote an atmosphere of fair competition,'' among domestic and foreign economic media, spokesman Shen Guofang said.

But many observers say hard-edged ideology and money, or the lack of it, appear to be the main reasons for the change.

The new procedures are to some extent the idea of Xinhua president Guo Chaoren, an ideologue whose antagonism toward the Western media is well-known.

After years of huge expenditures and failing revenues, Xinhua may be close to bankruptcy, many analysts say. They speculate that failure to compete with Western news agencies may have made cashing in on the success of its foreign counterparts a more attractive alternative to bankruptcy. The annual revenues of foreign news services are in the tens of millions of dollars.

But Xinhua has yet to make clear how it will implement its new restrictions. Under the new policy, it will be forced to come up with a licensing system by which all vendors would pay the agency for the right to distribute economic information to Chinese clients.

A Xinhua spokesman admitted an overall plan would not be ready until next month, but insisted the measures would not slow the transmission of real-time news into the country. Indirectly acknowledging the agency's role as censor, he admitted Xinhua would monitor the news but not try to stop stories in advance. It would intervene, however, if any information appeared to domestic users that attacked China and was not linked to economics.

As censor, Xinhua's renewed threat ups the stakes and could result in the kind of self-censorship that Hong Kong and mainland journalists already practice.

But many bankers and traders wonder whether Xinhua will be able to pick and choose who gets what kind of information. Since the agency has neither the technical nor managerial expertise to monitor and relay the massive amounts of information, foreign agencies like Reuters have some breathing room.

The bottom line

But the government's sweeping edict is more likely an attempt to keep a tight lid on power and micro-manage news in order to guarantee the political stability after the death of paramount leader Deng Xiaoping.

Beijing clearly wants greater control over its emerging financial-information market, which has splintered into of chaos costing the government millions of dollars every year. In late 1994, China's stock markets convulsed and plunged amid speculative reports that Mr. Deng had died, and despite official denials of the rumors, market indexes continued to fall.