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China toughened up regulation of its media and entertainment sector in 2005, but local and foreign players can expect a lighter touch in the future.

Patience — and respect — were the watchwords of Hugh Stephens, Time Warner’s senior VP for strategic policy in Asia, and Marcia Ellis, Hong Hong-based counsel with Gotham lawyers Paul, Weiss, Rifkind, Wharton & Garrison. They spoke Wednesday at an American Chamber of Commerce media law conference here.

Last year “felt as if we had taken a great leap backward after a long run of steady progress forward,” Ellis said.

In February 2005, China placed new emphasis on guarding against harmful foreign culture and the export of Chinese culture. “As China comes into its own as a world economic power, it believes that its status should also be reflected on the global media front.”

Ellis said the stricter enforcement of notices and regulations is not aimed solely at blocking foreign media groups but also affects local Chinese companies. However, in some cases, regulatory goals seem to be at odds with each other. China is pushing for conversion to digital TV but is “aggravating the content deficit” that limits its uptake. Similarly, it wants greater exports but is hampering Chinese companies’ efforts to cooperate with foreign media.

Ellis expects the 2008 Olympics in Beijing to be a catalyst for regulatory progressiveness. “China doesn’t want the issues, the social unrest, to be around by 2008. And it does want digital TV to be rolled out. They don’t have two years — they need to make those decisions now.”

Stephens said, “Investment in infrastructure (in China) is welcome, but what you put in the pipe is more sensitive.” He added that China is generally more wary about news services than about entertainment, although there are exceptions, such as the recent ban on “Memoirs of a Geisha.”

On freedom of the press, Stephens said China has made “enormous progress in recent years.” Media are losing state subsidies, becoming more entrepreneurial and pushing the margins of acceptability; however, there will continue to be push and pull between media and regulators. “Officials we talk to see this (regulatory climate) as a temporary position,” Ellis said. “And the amount we move forward is more than the amount we move back.”