Any investor seeking to better understand the kinds of challenges that industry regulation can pose to businesses in China would be well advised to take a look at Beijing’s handling of online video companies during the past year.
The saga began last December, when regulators suddenly took aim at a sector that had previously largely escaped official attention. Chinese video websites, mainly modelled on US pioneer YouTube, were happily tapping into the rapid growth of the domestic internet and the enthusiasm of the nation’s increasingly affluent urban young for online entertainment. By late 2007, such websites had attracted more than $190m in private investors – much of it from foreigners encouraged by Google’s acquisition of YouTube and hoping that they could benefit from the emergence of a Chinese equivalent.
