A University of California
Multi-Campus Research Group

Fall 2000 Conference: November 3-5


National and Transnational Linkages in the Construction of Digital Capitalism:
Bringing the Chinese into the Picture

By Dan Schiller and Yuezhi Zhao
Department of Communication
University of California San Diego

COPYRIGHT 2000 By Dan Schiller and Yuezhi Zhao

For Presentation at the Digital Cultures Conference
University of California Santa Barbara, 3-5 November 2000.

We wish today to draw attention to two momentous processes of change. First, the process of capitalist development is, at last, truly gripping the entire communications sector, worldwide, even as that sector becomes a general platform for subsequent capitalist development. Second, this emergent digital capitalism is rapidly supplanting national network structures with systems and applications that are planned and applied on a transnational basis. Intertwining, these two processes establish an ascendant capital-logic for network system and service development.

How then does a country which, almost alone in today's world, still purports to adhere to an avowedly national development policy, fare in this changed political economy? After explicating the general developments - emphasizing the audiovisual industry - we engage this question by looking at China's articulation with a transnational digital capitalism, again stressing the audiovisual sector.

The Audiovisual Sector: Toward A Transnational Commercial Culture

Over three decades - 1970-2000 - the number of television sets in use increased by a factor of eight. In the mid-1990s, a milestone of sorts was passed when more television sets were being used in LDCs than in developed nations. (1) TV channels proliferated, as system development accelerated, especially around new technologies. (2) Despite continuing inequalities in provision, most extreme throughout sub-Saharan Africa, television today unquestionably comprises a global cultural infrastructure.

Underway was a complex and dynamic process of institutional change. World television expansion occurred not through growth of established public service systems, which governments often harshly cut back, but rather as a profit-making service catering to advertisers. Typically, longstanding government restrictions on corporate/commercial ownership of terrestrial, cable, and satellite broadcasting, on commercial advertising, and on programming were relaxed. Through corporate investment and privatization, capital flooded in. (3) Liberalized national restrictions on media advertising fueled an equally unparalleled expansion of the sponsor system. A measurable ability to deliver what advertisers call "most-needed audiences" efficiently to consumer product marketers accordingly became the dominant metric for judging success and failure in the cultural sphere, across a sweeping range of new and old media.

And the structure of audiovisual industry changed in turn - in the U.S. and throughout the world. During the late 1980s and 1990s, the U.S. media industry underwent massive consolidation, even as several new media "platforms" succeeded. A handful of giant companies claimed assets encompassing everything from terrestrial broadcast networks to professional sports teams, theme parks and Web sites. Diversified entertainment companies like Time Warner, Viacom and Disney track consumers across individual media frontiers, and offer advertisers a whole array of platforms on which to stage the sales effort.

Ownership of these large "U.S." media companies also was significantly reconfigured: Sony and Seagram passed into the hands of foreign owners, and News Corporation was only nominally a U.S. company. Large media businesses headquartered outside the United States also laid claim to other prime U.S. media assets. Ten of the top twenty 'US' book publishers, four of the top 10 'US' magazine publishers, three of the top four "US' recording companies, today are foreign owned. Even the long-globally-dominant U.S. advertising industry became subject to increased transnationalization.

It is clear that the U.S. policy of selectively authorizing foreign investment in its unmatched domestic market for cultural commodities comprised a piece of calculated self-interest. The quid pro quo - a worldwide liberalization of corporate investment and commercial provision within the audiovisual sector - was a vital prerequisite of further industry expansion. In turn, the system's underlying logic became increasingly transnational.

Today, for example, cultural commodities are launched both from and into the U.S. market (4)- which now obligingly accommodates high-visibility program imports: for example, two of the top-rated network TV 'reality' programs of the past year, "Who Wants to Be a Millionaire" (5) and "Survivor," come from England and Sweden respectively. Even U.S. book imports are up, by an average of 6% annually in the period from 1992-99. (6)

Through the 1970s, television traffic between the US and the rest of the world was termed a "one-way street." (7) Today's admittedly more multidirectional programming flows, however, need not be taken to comprise a "contra-flow" through which a new pluralism supplants prevailing power relations in the transnational culture industry. (8) They may merely betoken increasingly transnational product sourcing and distribution patterns within the global audiovisual industry. The corporate titans of culture industry, which have devised a rich menu of co-production strategies through which to absorb and accommodate local partners, are actually consolidating - if not yet entirely harmonizing - the interests of domestic and transnational capital.

But the new transnational logic goes beyond exports and imports. Major US film studios today often must presell the foreign rights to a movie as a precondition for production; nearly a third of a $50 million film's budget typically comes from the major continental European countries. (9) When it comes time to make films, telefilms and advertisements, meanwhile, Canada is an increasingly tempting low-cost venue. Voice-overs for Spanish-language advertisements aimed at U.S. audiences, as well as movies dubbed into Spanish, make increasing use of actors based in low-wage Latin American countries, and - to the consternation of U.S. Hispanic actors - transmit and record their voices using high-quality telephone lines. (10) National and regional channel proliferation likewise has spurred selective growth of domestic programming in particular genres and markets. (11) In 1999, Sony created 4,000 hours of TV programming in languages other than English, more than twice its output of English-language shows. Sony produced 33 hours of programming a week in Hindi, for instance, and transmitted it not just to India but also to Africa, Britain, North America and the Middle East, both for its own channels and for sale to other groups. (12)

Far from heralding a new era of democratic choice, in turn, channel proliferation and targeted and "niche" programming signify merely that the transnational audiovisual industry is willing to parasitize, rather than flatten, cultural differences - where such variation gives hope of profitability. Truly nonprofit, not to speak of oppositional, cultural production, however, is not necessarily less disadvantaged than before.

In the meantime, a handful of familiar networks and genres continue to spearhead cultural homogenization on a global scale. By early 2000, Rupert Murdoch's News Corporation had the ability to reach 60 percent of the world's homes via a series of satellite television systems. (13) News, sports, video music, Hollywood film and, perhaps, pornography, head this short list. But these blockbuster offerings no longer comprise a global projection of an American culture; instead, they emanate from an increasingly transnationalized culture industry.

Radically changed patterns of ownership and industry practice are likewise apparent throughout the greater telecommunications industry. Between 1984 and July 1999, around $244 billion worth of telecom privatizations took place worldwide. As of 1999, of the 189 members of the International Telecommunication Union, almost half (90) had wholly or partially privatized their existing telecom operators, 18 completely. Of the nonprivatized operators, more than thirty planned to privatize. (14) It was not only that corporate ownership and performance norms had become increasingly well-established over this critical infrastructure. It was also that market entry and operation had been massively (though by no means entirely) relaxed. In addition, an increasingly harmonized multilateral operating framework, affording predictable market access to equipment and services worldwide, was ratified through the WTO Basic Telecom Agreement in 1997. (15)

The cardinal result of this tectonic shift has been to grant corporate carriers and business users license to cooperate in integrating networks (including above all the Internet) into the workaday operations of the world business system. The design of this emerging digital capitalism is essentially transnational: even in the face of intermittent nationalist impulses, nationally integrated markets and production systems are being relinquished, in favor of "a global market for goods and services and the emergence of an international production system, complemented by an increasingly global market for firms." (16)

To what extent is China participating in this process? What room is there for China - and, by extension, many other less-favored countries - to pursue national development within the framework of an increasingly transnational capitalism based on networks?

"If You Want to Be Global, You've Got to Play in China"

From century-old Western capitalist dreams of selling one pair of shoes to every Chinese to Bill Gates' recent ambition of selling every Chinese household a dumb-down version of his WebTV, the Chinese market has held perpetual allure to foreign capital. As an investment banker put it recently, "If you want to be global, you've got to play in China." (17)

Two important developments in the domestic Chinese communication industries since the late 1970s have laid the ground for the expansion of transnational-national communication linkages: the commercial revolution in the Chinese mass media and the network expansion drive in telecommunications. In the mass media sector, the Chinese state has substantially withdrawn subsidies and progressively unleashed the forces of commercialism, while crushing forces of democratization. By the mid-1990s, an advertising supported mass media system, especially television, has effectively connected the vast majority of the Chinese population to the global consumer culture.

Concurrently, as part of its strategy to leapfrog development and to launch China into the information age, the Chinese state prioritized information technologies and mobilized state and societal resources to accelerate telecommunications network construction. The result has been an unprecedented network expansion in the entire history of world telecommunications. By September 20, 2000, China had built the world's second largest fixed line and mobile phone networks. The number of telephone subscribers grew from just above 2 million in 1979 to 200 million in September 2000. (18)

Despite its protectionist intentions, highly ritualized political campaigns, and considerable domestic and international opposition, China's integration into global capitalism both in and through the communication industries over the past two decades has continued to deepen - as a brief look at the Chinese film industry underscores.

"Titanic" and the Sinking of Domestic Chinese Cinema

Film was introduced into China through the West in 1896; and Hollywood came to dominate Chinese cinema before 1949. (19) Although the Communist Revolution ended Hollywood's fortune in China and the Maoist regime nurtured a domestic film industry for propagandist objectives, the Chinese film industry at the turn of the new century stands a good chance, once again, of domination by Hollywood.

The domestic film industry's articulation toward the global film industry, however, has changed. On one side, Chinese films have selectively entered the international market. "Fifth Generation" directors such as Chen Kaige and Zhang Yimou have garnered prizes at major international film festivals; and their critically acclaimed films are available in major movie rental stores in North America. (20) Gradually, these filmmakers have grown increasingly autonomous of the domestic Chinese film infrastructure and gained the support of foreign investors and distributors. For example, Chen Kaige's latest epic, "The Emperor and the Assassin," was funded by Japanese capital and distributed by Sony, and he is making his English-language debut in Hollywood by directing "Killing Me Softly," an erotic big budget thriller starring Heather Graham. (21) Chinese cultural resources, from the ancient legend Mulan to contemporary Chinese sceneries and talents, are being incorporated by Hollywood. While Mulan is Disneyfied, some 80% of China's cartoon artists are working for Disney. (22)

The other side of this globalization process is apparent domestically, within China. In the early 1980s, Chinese films were enormously popular. (23) Foreign films, too, were popular, and they were imported from all parts of the world. For a series of political, economic, social, cultural, and technological reasons, however, domestic films began to lose their popular appeal by the late 1980s. Nor did the internationally renowned "fifth generation" films regain this popular domestic audience. Many of these films were banned for political reasons. And, while the post-Cultural Revolution intellectual elite was keen on exploring the cultural roots of China's ill-fated quest for modernity and telling the rest of the world about their travails during the Cultural Revolution (two "trade mark" themes of "fifth generation" films), China's affluent and young consumers did not necessarily identify with such films. They preferred to leave historical reflections to intellectuals, and material deprivation to the peasantry.

For its part, Hollywood sought to re-enter the Chinese market as soon as US-China diplomatic relations was re-established in 1979. The Chinese audience, isolated from it for nearly 30 years, necessarily had some catching-up to do. Hollywood's re-entry into China thus began with public screenings of cheap titles from the 1940s. By 1985, however, when Hollywood's blockbuster "Rambo: First Blood" was publicly released in China and caused a national sensation, China's re-engagement with Hollywood was set to intensify rapidly.

A decade later, an epistemic transformation had occurred. Hollywood movies are not just foreign movies from the U.S. They are "big movies" (da pian) or "grand movies" (ju pian), the master of all movies, standing above movies from other countries. To see them has become a cultural citizenship entitlement for China's rising middle class. The flourishing domestic pirate VCD market of Hollywood films is a clear sign of this. Beginning in 1995, China made a commitment to import up to 10 first run Hollywood films per year. Driven by profit considerations, the state-controlled film distributor and cinemas aggressively promoted Hollywood movies, while ignoring domestic productions. This double standard, as Dai Jinhua, a Beijing University professor noted, "further intensifies the squeezing power of transnational capital over domestic films." (24) In 1995, the "most glorious year" for the Chinese film box office due to the surge in Hollywood imports, more than 70 domestic Chinese films were shelved, without a chance to be exhibited in theatres. (25)

Thus, the process of the Chinese film industry's integration into "the new international division of cultural labor" (26) was well under way. In 1998, Hollywood's "Titanic" alone garnered one quarter of the total Chinese box office revenue. This was also the year Chinese domestic film production, which had ranged between 100 to 130 feature films per year since 1980, dropped to 37. The Xian Studio, the cradle for several fifth generation filmmakers, meanwhile, had to lay off more than 10% of its workforce. (27) Commenting on the state of the Chinese film industry in 1998, Dai wrote: "Like Titanic, the Chinese film industry is sinking amidst tender feelings and happiness, almost without any measures of resistance… I don't know how the Chinese film industry can rescue itself and survive in the cultural market." (28)

Although Dai was already writing obituary for the Chinese film industry, to Hollywood, it is likely that this is only the beginning of a continuing process of change. Under the existing Chinese film importation structure, Hollywood has not actually profited much. (29) In 1998, major Hollywood studios garnered just $18 million in revenue from China, the equivalent of what the studios earned in Peru. (30) The Chinese cinema infrastructure is, moreover, an insult to Hollywood blockbusters and their viewers: there are no multiplexes, no elaborate snack bars, cinemas are poorly equipped and few and far between. (31)

It is in this context that the recent negotiations to bring China into the World Trade Organization acquire importance, as they portend a full-scale restructuring and reinvention of the Chinese film industry - from production to distribution and exhibition.

Although the audiovisual sector was excluded from the final GATT agreement that created the WTO, due to opposition by virtually every GATT nation apart from the US, (32) the powerful Hollywood lobby secured major gains in the recent US-China WTO deal. Under the agreement, China will double its quota of revenue-sharing foreign films from 10 to 20 per year and increase the total number of foreign film quota to 50 in three years. It will reduce tariffs on audiovisual imports, open up its consumer market for audiovisual products to foreign distributors, and more importantly, allow foreign investors to own up to 49% of companies that build, own and operate cinemas in China. (33) Meanwhile, the Chinese film industry is being reconstructed to "be on the same track" as Hollywood through further commercialization.

The Greater Communications Sector

While the long-established Chinese film industry would seem to be in the process of being regrafted onto the now-transnational film industry, China's nascent Internet industry is developing within a transnational framework from its inception. The fortune of leading Chinese portals, for example, is closely tied to Wall Street venture capital. It is still unclear whether China's news media and telecommunications industries will follow a different path. The news media are officially excluded from the WTO process. But foreign capital, through selected joint ventures in lucrative print and satellite television niche markets, has already exerted considerable competitive pressure on such domestic media. Moreover, digital convergence is blurring the lines between traditional and new media.

China's exploding telecommunication services market constitutes an even larger prize. As part of the conditions for China's WTO entry, China will immediately open up its most lucrative telecommunications service markets to foreign operators, and will eventually allow 49% foreign ownership in basic services and 50% for value added services. WTO entry not only portends the involvement of foreign capital in services provision, but also an accelerated restructuring of China's telecommunications industry along the neoliberal lines embedded in the WTO's Basic Telecom Agreement. Although details regarding foreign investment in this sector are yet to be worked out because of intensive domestic struggles, China's commercially aggressive state-owned telecommunications operators are selling pieces of themselves to foreign "strategic partners" at a rapid rate. (34) The Chinese telecommunication industry's "dangerous liaison" with global capital, a process that the Chinese media have called "dance with wolves," is in full swing.


The process of reintegrating China into transnational capitalism, we must emphasize in conclusion, has already occasioned significant domestic political, social and cultural conflict - as is the case in other parts of the world.

On one hand, prevailing policies have been sustained only by a bloody crackdown on domestic opposition and by an explicit ban on open debate on the political nature of the reforms, especially the meanings of socialism, in the channels of public communication. Often behind closed doors, on the other hand, intense top-level political struggles have indeed unfolded. While top leaders such as Jiang Zemin and Zhu Rongji aspired to be "world statesmen" by embracing the US and the WTO, the country's Minister of Information Industry reportedly tendered his resignation in protest against the government's telecommunications concessions. At the same time, some of the Party's old guard have linked the government's readiness to accept capitalist globalization to a willingness to serve in a puppet government. (35) Liberals, in contrast, see the WTO as an external force that can be utilized by Chinese national elites to dismantle the residual legacies of state socialism, especially state ownership and one Party rule.

Possibly China's leadership will be able to stabilize these charged conflicts over national policy. However, its contradictory pursuit of national development by means of a full-scale engagement with transnational digital capitalism seems all but certain to generate further social and political opposition, from groups that are disenfranchised or alienated by that very process. Is it too much to hope that such resistance movements within China might link with outside groups, extending an already-apparent process of oppositional globalization? Either way, digital capitalism will inherit its forebear's overarching task: the effective management of dissent, whether local or global.


1. The number of TV sets stood at 692 million for less developed countries, compared to 669 million in developed countries in 1996. Unesco Statistical Yearbook 1998. Geneva: UNESCO, 1998: 6.5

2. Hernan Galperin, "Cultural industries policy in regional trade agreements: the cases of NAFTA, the European Union and MERCOSUR," Media Culture & Society 21 (5), September 1999: 636, quoting EU data.

3. Dan Schiller, Digital Capitalism: Networking the Global Market System. Cambridge: MIT, 1999: 66-69.

4. News Corporation has been cited for "developing more product in foreign markets that they can 'reverse export' to the United States." Diane Mermigas, "More media firms join global roster," Electronic Media 12 April 1999: 47

5. The program was licensed to no less than 80 countries. Wendy Bounds, "A 'Million' Just Isn't as Valuable In Dot-Com Era," WSJ 11 Oct 2000: B2.

6. US Industry & Trade Outlook 2000: 25-12.

7. Kaarle Nordenstreng and Tapio Varis, Television Traffic - A One-Way Street? Reports and Papers on Mass Communication, No. 70. Paris: Unesco, 1974.

8. Stuart Cunningham, Elizabeth Jacka and John Sinclair, "Global and regional dynamics of international television flows," in Thussu, Ed., Electronic Empires: 178-79, 181, 186, 189.

9. Charles Goldsmith, "Moguls Rewrite Script at Cannes as Euro Tanks," WSJ 19 May 2000: B1.

10. Eduardo Porter, "Hispanic Actors Await End of Ad Strike," WSJ 22 Sept 2000: B3.

11. Karen Siune and Olof Hulten, "Does Public Broadcasting Have a Future?" in Dennis McQuail and Karen Siune, Media Policy: Convergence, Concentration and Commerce. London: Sage, 1998: 29-30; Greg Spring, "International TV's Hard Sell," Electronic Media 12 April 1999: 1, 38.

12. Elizabeth Guider, "Sony Ups Its Local Payoff," Variety 26 July-1 August 1999: 23; Frank Rose, "Think Globally, Script Locally," Fortune 8 November 1999: 158.

13. Diane Mermigas, "Murdoch's global health plan," Electronic Media 10 April 2000: 1, 6.

14. Ambassador Richard W. Fisher, "Trade In Telecommunications Services," Testimony Before the House of Representatives Committee on Commerce, Subcommitee on Telecommunications, Trade and Consumer Protection, 7 Sept 2000: 11.

15. Ambassador Charlene Barshefsky, U.S. Trade Representative, "Electronic Commerce: Trade Policy In A Borderless World," The Woodrow Wilson Center, Washington, D.C., 29 July 1999: 6.

16. UNCTAD, World Investment Report 2000: Cross-border Mergers and Acquisitions and Development. Overview. New York: United Nations, 2000: 12.

17. Henny Sender, "Telecoms set sights on China," The Globe and Mail, October 6, 2000: B12.

18. Wu Jichuan, Speech at the State Council Press Office News Brief, September 25, 2000,

19. Marie Cambon, The Dream Palaces of Shanghai: American Films in China's Largest Metropolis, 1920-1950, MA thesis, School of Communication, Simon Fraser University, 1993; Paul Clark, Chinese Cinema: Culture and Politics Since 1949 (Cambridge: Cambridge University Press, 1987).

20. There is a wide range of English literature on these "fifth generation" films. See, Bonnie MacDugall, Yellow Earth: A Film by Chen Kaige with a Complete Translation of the Filmscript (Hong Kong: The Chinese University Press, 1991); Paul Pickowicz, "Velvet Prisons and the Political Economy of Chinese Filmmaking," in Deborah Davis, Richard Kraus, Barry Naughton, and Elizabeth J. Perry (eds.), Urban Spaces in Contemporary China: The Potential for Autonomy and Community in Post-Mao China (Cambridge University Press, 1995), pp. 193-220; Rey Chow, Primitive Passions: Visuality, Sexuality, Ethnography, and Contemporary Chinese Cinema (New York: Columbia University Press, 1995); Kwok-kan Tam & Wimal Dissanayake, New Chinese Cinema (Hong Kong, Oxford University Press, 1998); Jerome Silbergeld, China Into Film: Frames of Reference in Contemporary Chinese Cinema (Seattle, Wash: University of Washington Press, 1999), among others.

21. Miro Cernetig, "Hollywood in China: 'The Invasion will be Unprecedented," The Globe and Mail, June 6, 2000: R1.

22. Joseph M. Chan, "Disneyfing and Globalizing the Chinese Legend Mulan: A Study of Transculturation," paper presented at the International Conference on "In Search of Boundaries: Communication, Nation States, and Cultural Identities," The Chinese University of Hong Kong, June 25-26, 1999: 17-18.

23. For an excellent analysis of the popularity of Chinese films in the early 1980s, see Paul Pickowicz, "Popular Cinema and Political Thought in Post-Mao China: Reflections on Official Pronouncements, Film, and the Film Audience," in Perry Link, Richard Madsen, and Paul Pickowicz (eds.), Unofficial China (Boulder, CO: Westview Press, 1989): 37-53.

24. Dai Jinhua, "Chinese Film: Sinking in Happiness…" (Zhongguo dianying: zai kuaile zhong chenmo…" Modern Communications (Xiandai chuanbo), No. 1, 1999: 21.

25. Ibid.

26. Toby Miller, "Consuming the Citizen: The New International Division of Cultural Labor and the Trade in Screen Texts," paper presented at the International Conference "In Search of Boundaries: Communication, Nation-States and Cultural Identities," The Chinese University of Hong Kong, June 25-26, 1999.

27. Liu Xitao, "China's Film Industry Suffers a Major Blow by Joining the WTO" (Jiangru shimou, Zhongguo dianying shou menglian chongji), The Chine Press (Qiaobao), November 24, 1999: B1.

28. Dai Jinhua, op cit: 22.

29. Richard E. W. Griner, "Hollywood, the WTO and China: Constructing Another Great Wall," unpublished paper, June 2000.

30. James Bates and Maggie Farley, "Hollywood, China in a Chilly Embrace," Los Angeles Times, June 13, 1999.

31. While the US has one screen per 8,600 people, China has just one screen per 122,000 people. Motion Picture Association of America, Jack Valenti Press Releases, "Statement of Jack Valenti, Chairman and Chief Executive Office, Motion Picture Association, Before the Committee on Ways and Means Subcommittee on Trade, Regarding US-China Trade Relations and the Possible Accession of China to the World Trade Organization,"

32. Toby Miller, op cit: 15.

33. Motion Picture Association of America, Jack Valenti Press Releases, "Valenti Urged Senate to Grant PNTR to China,"

34. In addition to their high-profile global stock offerings in the New York and Hong Kong stock exchanges since 1997, China Mobile (HK), the country's biggest mobile phone operator, sold 2% of its stake to Vodafone Group PLC for US $2.5 billion in early October, 2000, with an option for Vodafone to take more later; by late October, 2000, China Unicom, the country's second telecom carrier, had announced that it had begun looking for a foreign strategic investor to buy up to 10% stake in the company. Henny Sender, loc cit; Christine Chan, "China Unicom in the Market for US$2.5b Investor," South China Morning Post, October 25, 2000, Internet Edition.

35. Joseph Fewsmith, "China and the WTO: The Politics Behind the Agreement,"

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