CHINESE ADVERTISING INDUSTRY ENTERS A NEW ERA;AD EXECS, GOVERNMENT OFFICIALS AT ODDS OVER CONTROL VS. FREE MARKET

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[hong kong] Like much of Asia, China is weighing a desire for government control with the demands of commerce in setting rules affecting a variety of advertising ranging from a tax on imported TV commercials to tobacco ads.

China is the world's fastest-growing major ad market, and will also rule the highly-developed ad market of Hong Kong starting next year.

JOINT LIAISON GROUP

To help China develop its ad industry, Hong Kong ad execs have formed a Joint Liaison Group with government officials from the China Advertising Association to discuss issues such as taxation and approval processes for ads. Four representatives of the advertising association, a national industry body that comes under the office of the State Administration of Industry and Commerce, plan to meet every two months with the Hong Kong's Association for Accredited Advertising Agents.

"This is the only official channel between the Hong Kong industry and the Chinese industry," said Howard Wang, vice chairman of the AAAA and chief executive officer of Bozell Worldwide's Hong Kong/China operations.

As a clue to how the market will develop, China watchers like to cite an old Chinese saying: The mountains are high and the emperor is far away.

"China's a very big country," said Antony Young, a Chinese New Zealander who is regional CEO for Asia of Zenith Media, the media buying arm of Saatchi & Saatchi Advertising and Bates Worldwide. "There are lots of regulations issued from Beijing but to what extent they're policed does vary from market to market [within China]."

In cosmopolitan Shanghai, for example, a shampoo commercial might show a model's shoulder. For more conservative provinces, it could need re-editing, leading to time-consuming and expensive approval processes and production. An ad agency's relationship with government authorities is also key to getting ads approved.

MANY RULES

The Chinese government also makes rules to help govern the economy, such as a recent edict from Beijing limiting TV rate increases in an effort to curb inflation. And advertisers and their agencies are unhappy about a tax of up to 35% on imported commercials, designed to encourage local production.

"The next step will be to insist all ads are made in China," Mr. Young said. "We think that is not far away. You have to be a player in China if you want to be a regional player in Asia, so we'll see increased production costs for advertisers."

China's definitive regulatory move was the approval of the February 1995 advertising law, making official a draft that had been circulating since 1981. Rules cover everything from restrictions on tobacco and alcohol ads and making comparisons between products to banning the Chinese flag in ads.

"When the Chinese government decided to enforce the rules, everyone had a week to changetheir ads," Mr. Young said. "Sixty percent of our ads were no longer acceptable and couldn't run."

Although the law made it difficult for multinational advertisers to claim superiority for their products, it also weeded out ludicrous claims and miracle cures commonly made for local brands.

In other measures, tobacco industry execs fear the Chinese government will use an anti-smoking conference in Beijing next year to crack down on tobacco advertising. Outdoor ads, which take a bigger chunk of ad spend than television in China, and sponsorship are currently allowed.

In Hong Kong, a bill that would have banned outdoor advertising and sponsorship has vanished under vigorous lobbying from the ad industry but is expected to reappear. A bill in Taiwan threatens a total cigarette ad ban.

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