《社会保障概论》课程教学资源（课后阅读资料）APSR_Volume112. Issue 4.Nov 2018_Media_Bias_against_Foreign_Firms_as_a_Veiled_Trade_Barrier_Evidence_from_Chinese_Newspapers

American Political Science Review (2018)112.4.954-970 doi:10.1017/S0003055418000242 American Political Science Association 2018 Media Bias against Foreign Firms as a Veiled Trade Barrier: Evidence from Chinese Newspapers SUNG EUN KIM Korea University hile the rules of international trade regimes prevent governments from employing protectionist instruments,governments continue to seek out veiled means of supporting their national indus- tries.This article argues that the news media can serve as one channel for governments to favor domestic industries.Focusing on media coverage of auto recalls in China,I reveal a systematic bias against foreign automakers in those newspapers under strict government control.I further analyze subnational reporting patterns,exploiting variation in the level of regional government interest in the automobile industry.The analysis suggests that the media's home bias is driven by the government's protectionist interests but rules out the alternative hypothesis that home bias simply reflects the nationalist sentiment of readers.I show that this home bias in news coverage has meaningful impact on actual consumer behavior, combining automobile sales data and information on recall-related web searches. INTRODUCTION erage they receive in the local media.The Wall Street Journal,for instance,reported that "companies such n expansion of international trade regimes has as retailer Wal-Mart and energy giant ConocoPhilips increased the cost of employing protectionist face[d]a wave of critical coverage by state media of measures.States have resorted to nontariff bar- grievances against foreign companies."1 A series of em- riers (NTBs)as an alternative to raising tariffs (Mans pirical anecdotes alone,however,neither substantiates field and Busch 1995),but the World Trade Organi- the existence of home bias (i.e.,a systematic tendency zation (WTO)has strengthened its regulations over to favor domestic firms over foreign ones)nor iden- NTBs under the core principle of national treatment tifies whether media bias,if any,is driven by govern- (i.e.,an equal treatment of local and foreign products). ments'protectionist incentives or demand-side factors Nonetheless,many member states continue to exhibit such as the nationalist sentiment. interest in protecting domestic industries and seek out To explore the magnitude of media bias and its more veiled and indirect means of supporting their sources,I utilize a set of inferential strategies with an national industries.What measures can states employ empirical focus on Chinese newspapers.I focus on one when traditional measures become costly? This article argues that the news media can serve as sector and examine instances of faulty production in the same sector to account for differences in product one means of protecting domestic industries.In coun- quality between domestic versus foreign firms.Exam- tries where the government controls the media,it can ining news coverage of automobile recalls is an ideal influence media coverage to present domestic firms in test because product recalls have obvious negative im- a more favorable light than their foreign counterparts. plications on the products'quality,and their character- By influencing a major source of product-related in- 235.5010 istics are comparable across different cases.Focusing formation,governments can indirectly shape consump- on Chinese newspapers allows me to pin down gov- tion patterns.Yet,governments can circumvent possi- ernment influence due to the variation in the level of ble disputes at the WTO due to the absence of explicit government control over different newspapers.I fur- regulations and the difficulty of verifying government ther delineate the effect of protectionist interest by involvement. exploiting subnational variations in regional govern- In fact,firms doing business in foreign markets have ments'ownership of automotive industries. repeatedly expressed concerns over unfavorable cov- My analysis of auto recall coverage by 121 Chinese newspapers between 2005 and 2013 reveals a system- Sung Eun Kim is an Assistant Professor of Political Science atic home bias in government-controlled media.Offi- Department of Political Science and International Relations,Korea cial newspapers controlled by the central government University,145 Anam-ro,Seongbuk-gu,Seoul,Korea,02841 (sung_kim@korea.edu) are nearly twice as likely to cover recalls by foreign I thank Andrew Cheon.Shigeo Hirano,Xian Huang,Dong automakers and publish lengthier and more negative Jung Kim,Florence Larocque,Yotam Margalit,Tamar Mitts,An- stories about such events when compared to similar re- drew Nathan,Krzysztof Pelc,Pablo Pinto,Subhasish Ray,Johannes calls involving domestic automakers.Further,a subna- Urpelainen,Joonseok Yang.Boliang Zhu,three anonymous re. tional analysis corroborates that the bias is driven by viewers,and the journal's editor for their useful comments.I also benefited from feedback from seminar participants at Columbia government interest in supporting the domestic indus- LSE,NUS,NYU,NYU-Abu Dhabi,UPenn,Yale,and Yale-NUS try.Official regional newspapers in provinces where the and conference participants at APSA.IPES.and MPSA.I thank local governments own automotive enterprises exhibit Kay Key Teo and Lee Shu Hui Jesslene for their excellent re. search assistance.All errors are my own.Replication files are available at the American Political Science Review Dataverse: https://doi.org/10.7910/DVN/JSROOE. See Laurie Burkitt,"Foreign Firms Feel China's Heat."The Wall Street Journal,October 19,2011.For another instance,see Kazunori Received:January 30,2017;revised:September 28,2017;accepted: Takada and Samuel Shen."China Media Train Fire on U.S.Food Gi- April 27 2018.First published online:June 13,2018. ants over Chicken Scare."Reuters,January 17 2013. 954

American Political Science Review (2018) 112, 4, 954–970 doi:10.1017/S0003055418000242 © American Political Science Association 2018 Media Bias against Foreign Firms as a Veiled Trade Barrier: Evidence from Chinese Newspapers SUNG EUN KIM Korea University While the rules of international trade regimes prevent governments from employing protectionist instruments, governments continue to seek out veiled means of supporting their national indus￾tries. This article argues that the news media can serve as one channel for governments to favor domestic industries. Focusing on media coverage of auto recalls in China, I reveal a systematic bias against foreign automakers in those newspapers under strict government control. I further analyze subnational reporting patterns, exploiting variation in the level of regional government interest in the automobile industry. The analysis suggests that the media’s home bias is driven by the government’s protectionist interests but rules out the alternative hypothesis that home bias simply reflects the nationalist sentiment of readers. I show that this home bias in news coverage has meaningful impact on actual consumer behavior, combining automobile sales data and information on recall-related web searches. INTRODUCTION An expansion of international trade regimes has increased the cost of employing protectionist measures. States have resorted to nontariff bar￾riers (NTBs) as an alternative to raising tariffs (Mans￾field and Busch 1995), but the World Trade Organi￾zation (WTO) has strengthened its regulations over NTBs under the core principle of national treatment (i.e., an equal treatment of local and foreign products). Nonetheless, many member states continue to exhibit interest in protecting domestic industries and seek out more veiled and indirect means of supporting their national industries. What measures can states employ when traditional measures become costly? This article argues that the news media can serve as one means of protecting domestic industries. In coun￾tries where the government controls the media, it can influence media coverage to present domestic firms in a more favorable light than their foreign counterparts. By influencing a major source of product-related in￾formation, governments can indirectly shape consump￾tion patterns. Yet, governments can circumvent possi￾ble disputes at the WTO due to the absence of explicit regulations and the difficulty of verifying government involvement. In fact, firms doing business in foreign markets have repeatedly expressed concerns over unfavorable cov￾Sung Eun Kim is an Assistant Professor of Political Science, Department of Political Science and International Relations, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul, Korea, 02841 (sung_kim@korea.edu). I thank Andrew Cheon, Shigeo Hirano, Xian Huang, Dong Jung Kim, Florence Larocque, Yotam Margalit, Tamar Mitts, An￾drew Nathan, Krzysztof Pelc, Pablo Pinto, Subhasish Ray, Johannes Urpelainen, Joonseok Yang, Boliang Zhu, three anonymous re￾viewers, and the journal’s editor for their useful comments. I also benefited from feedback from seminar participants at Columbia, LSE, NUS, NYU, NYU-Abu Dhabi, UPenn, Yale, and Yale-NUS and conference participants at APSA, IPES, and MPSA. I thank Kay Key Teo and Lee Shu Hui Jesslene for their excellent re￾search assistance. All errors are my own. Replication files are available at the American Political Science Review Dataverse: https://doi.org/10.7910/DVN/JSR0OE. Received: January 30, 2017; revised: September 28, 2017; accepted: April 27, 2018. First published online: June 13, 2018. erage they receive in the local media. The Wall Street Journal, for instance, reported that “companies such as retailer Wal-Mart and energy giant ConocoPhilips face[d] a wave of critical coverage by state media of grievances against foreign companies.”1 A series of em￾pirical anecdotes alone, however, neither substantiates the existence of home bias (i.e., a systematic tendency to favor domestic firms over foreign ones) nor iden￾tifies whether media bias, if any, is driven by govern￾ments’ protectionist incentives or demand-side factors such as the nationalist sentiment. To explore the magnitude of media bias and its sources, I utilize a set of inferential strategies with an empirical focus on Chinese newspapers. I focus on one sector and examine instances of faulty production in the same sector to account for differences in product quality between domestic versus foreign firms. Exam￾ining news coverage of automobile recalls is an ideal test because product recalls have obvious negative im￾plications on the products’ quality, and their character￾istics are comparable across different cases. Focusing on Chinese newspapers allows me to pin down gov￾ernment influence due to the variation in the level of government control over different newspapers. I fur￾ther delineate the effect of protectionist interest by exploiting subnational variations in regional govern￾ments’ ownership of automotive industries. My analysis of auto recall coverage by 121 Chinese newspapers between 2005 and 2013 reveals a system￾atic home bias in government-controlled media. Offi￾cial newspapers controlled by the central government are nearly twice as likely to cover recalls by foreign automakers and publish lengthier and more negative stories about such events when compared to similar re￾calls involving domestic automakers. Further, a subna￾tional analysis corroborates that the bias is driven by government interest in supporting the domestic indus￾try.Official regional newspapers in provinces where the local governments own automotive enterprises exhibit 1 See Laurie Burkitt, “Foreign Firms Feel China’s Heat.” The Wall Street Journal, October 19, 2011. For another instance, see Kazunori Takada and Samuel Shen, “China Media Train Fire on U.S. Food Gi￾ants over Chicken Scare.” Reuters, January 17, 2013. 954 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Media Bias against Foreign Firms as a Veiled Trade Barrier a home bias,but this tendency is less pronounced in itoring and regulating protectionist behavior by inter- nonofficial newspapers located in the same provinces national institutions,which are not particularly effec- and among official newspapers in provinces without tive at addressing indirect or disguised protectionism any direct stake in the automotive industry. (Kim 2016;Rickard and Kono 2014).Compared to gov- I also provide evidence for the effect of home bias ernment procurement or health and safety policies,the on consumer behavior.Through the analysis of recall- use of news media is even more opaque,hindering ef- related web searches,I find that recalls of foreign cars fective regulation.Even if governments were to make receive more public attention than those of domestic an unlikely commitment to ensure equal treatment of cars.The effect of recalls on automobile sales is also foreign goods in media coverage,it would be almost negative for foreign automakers,while the recall effect impossible for international institutions to enforce. for domestic firms is ambiguous.My analysis demon- The next section further discusses the broader litera strates that news coverage largely accounts for why for- ture on protectionism and outlines theoretical expecta- eign firms face more negative consequences from their tions regarding the sources of home bias in the media. recalls. I then describe my empirical strategy and dataset.The The finding has direct implications for challenges following section presents the findings and a series of faced by automakers in the world's largest automo- robustness tests,followed by an analysis on the pos- bile market.China's accession to the WTO in 2001 at- sible effects of home bias on consumer behavior.The tracted keen interest from global automakers due to its final section discusses the applicability of my findings enormous and fast-growing market.Despite its com- beyond China,as well as related implications for the mitment to tempering its protectionist policies,how- study of regime type and trade policy ever,the Chinese government has demonstrated a con- tinued interest in promoting its automobile industry (Gerth 2012).In fact,opening its market resulted only EXPLAINING HOME BIAS IN THE MEDIA in a sluggish increase in automobile imports,from 2.2% 4r元 of total car sales in 1998 to 5.9%in 2012,despite the Building on the literature on protectionism,I provide reduction of Chinese tariffs on vehicles from 101.1% the government-centered explanation of the home bias (1996)to 25.0%(since 2007).-This is partly due to the in the media.Namely,the media bias reflects the gov- presence of joint ventures,but my findings also provide ernment's incentive to employ less visible trade barri- a potential explanation for this phenomenon,namely ers without violating the rules of international trade that encouraging Chinese consumers to purchase Chi- institutions.Alternatively,the home bias may reflect the nationalist sentiment of readers.I discuss these nese products "violate[s]neither the WTO rules nor the market economic rules,"as asserted by the former two potential sources of media bias,in turn,and de- chief negotiator for China's WTO accession (Gerth rive observable implications for testing the existence 2012,213).The utilization of government-controlled of government-driven bias. media provides one such channel for influencing con- sumer decisions. The Argument:News Media as a More broadly,this article contributes to the study of Protectionist Measure international political economy by expanding the dis- cussion of NTBs.While previous research has focused International trade agreements have made imposing on ways governments can directly affect demand,sup- tariffs costly,and the use of NTBs as substitutes has ply,and prices of domestic and foreign goods(Naoi become more pervasive over the past few decades 2009;Rickard 2012),this article illuminates an indirect (Kono 2006:Mansfield and Busch 1995).Those alterna- protectionist mechanism through which governments tive strategies have themselves become costlier,how- affect the flow of product-related information.Individ- ever,as the WTO and other international trade agree- ual consumers play a significant role in international ments have caught on to this trend(Rickard and Kono trade relations,since their demand for domestic and 2014;Staiger 2012).For instance,the WTO significantly foreign products ultimately determines the trade flow. strengthened national treatment obligations through Government's attempts to indirectly foster a consumer the Technical Barriers to Trade Agreement and the preference for domestic products could constitute a se- Sanitary and Phytosanitary Measures Agreement,both rious barrier to trade. of which require member states to treat imported and This article also provides an implication for the effec- locally produced goods equally(Staiger 2012). eys tiveness of international trade institutions.The findings The costs of violating these rules may not be pro suggest that states can pursue concealed measures to hibitive,but member states are certainly discouraged protect domestic industries when trade policy is oth- from employing visible protectionist instruments.Since erwise constrained.Indirect measures might not be as the inception of the WTO,the use of a dispute set- effective as direct measures such as tariffs or quotas. tlement mechanism has become very common,espe- However,they may exacerbate the difficulties of mon- cially with regard to subsidies,countervailing mea- sures,and antidumping duties.The accused country needs to correct its protectionist practices once they are The tariff is based on the HS-code 8703 (motor cars and other vehicles principally designed for the transport of persons)from the ruled WTO-inconsistent,and it also pays a reputational WTO Tariff databases.The import rate is the author's own calcula- cost when its violations become widely known(Maggi tion based on the China Auto Market Almanac series. 1999),on top of the monetary cost of engaging in 955

Media Bias against Foreign Firms as a Veiled Trade Barrier a home bias, but this tendency is less pronounced in nonofficial newspapers located in the same provinces and among official newspapers in provinces without any direct stake in the automotive industry. I also provide evidence for the effect of home bias on consumer behavior. Through the analysis of recall￾related web searches, I find that recalls of foreign cars receive more public attention than those of domestic cars. The effect of recalls on automobile sales is also negative for foreign automakers, while the recall effect for domestic firms is ambiguous. My analysis demon￾strates that news coverage largely accounts for why for￾eign firms face more negative consequences from their recalls. The finding has direct implications for challenges faced by automakers in the world’s largest automo￾bile market. China’s accession to the WTO in 2001 at￾tracted keen interest from global automakers due to its enormous and fast-growing market. Despite its com￾mitment to tempering its protectionist policies, how￾ever, the Chinese government has demonstrated a con￾tinued interest in promoting its automobile industry (Gerth 2012). In fact, opening its market resulted only in a sluggish increase in automobile imports, from 2.2% of total car sales in 1998 to 5.9% in 2012, despite the reduction of Chinese tariffs on vehicles from 101.1% (1996) to 25.0% (since 2007).2 This is partly due to the presence of joint ventures, but my findings also provide a potential explanation for this phenomenon, namely that encouraging Chinese consumers to purchase Chi￾nese products “violate[s] neither the WTO rules nor the market economic rules,” as asserted by the former chief negotiator for China’s WTO accession (Gerth 2012, 213). The utilization of government-controlled media provides one such channel for influencing con￾sumer decisions. More broadly, this article contributes to the study of international political economy by expanding the dis￾cussion of NTBs. While previous research has focused on ways governments can directly affect demand, sup￾ply, and prices of domestic and foreign goods (Naoi 2009; Rickard 2012), this article illuminates an indirect protectionist mechanism through which governments affect the flow of product-related information. Individ￾ual consumers play a significant role in international trade relations, since their demand for domestic and foreign products ultimately determines the trade flow. Government’s attempts to indirectly foster a consumer preference for domestic products could constitute a se￾rious barrier to trade. This article also provides an implication for the effec￾tiveness of international trade institutions. The findings suggest that states can pursue concealed measures to protect domestic industries when trade policy is oth￾erwise constrained. Indirect measures might not be as effective as direct measures such as tariffs or quotas. However, they may exacerbate the difficulties of mon- 2 The tariff is based on the HS-code 8703 (motor cars and other vehicles principally designed for the transport of persons) from the WTO Tariff databases. The import rate is the author’s own calcula￾tion based on the China Auto Market Almanac series. itoring and regulating protectionist behavior by inter￾national institutions, which are not particularly effec￾tive at addressing indirect or disguised protectionism (Kim 2016;Rickard and Kono 2014). Compared to gov￾ernment procurement or health and safety policies, the use of news media is even more opaque, hindering ef￾fective regulation. Even if governments were to make an unlikely commitment to ensure equal treatment of foreign goods in media coverage, it would be almost impossible for international institutions to enforce. The next section further discusses the broader litera￾ture on protectionism and outlines theoretical expecta￾tions regarding the sources of home bias in the media. I then describe my empirical strategy and dataset. The following section presents the findings and a series of robustness tests, followed by an analysis on the pos￾sible effects of home bias on consumer behavior. The final section discusses the applicability of my findings beyond China, as well as related implications for the study of regime type and trade policy. EXPLAINING HOME BIAS IN THE MEDIA Building on the literature on protectionism, I provide the government-centered explanation of the home bias in the media. Namely, the media bias reflects the gov￾ernment’s incentive to employ less visible trade barri￾ers without violating the rules of international trade institutions. Alternatively, the home bias may reflect the nationalist sentiment of readers. I discuss these two potential sources of media bias, in turn, and de￾rive observable implications for testing the existence of government-driven bias. The Argument: News Media as a Protectionist Measure International trade agreements have made imposing tariffs costly, and the use of NTBs as substitutes has become more pervasive over the past few decades (Kono 2006;Mansfield and Busch 1995).Those alterna￾tive strategies have themselves become costlier, how￾ever, as the WTO and other international trade agree￾ments have caught on to this trend (Rickard and Kono 2014; Staiger 2012). For instance, the WTO significantly strengthened national treatment obligations through the Technical Barriers to Trade Agreement and the Sanitary and Phytosanitary Measures Agreement, both of which require member states to treat imported and locally produced goods equally (Staiger 2012). The costs of violating these rules may not be pro￾hibitive, but member states are certainly discouraged from employing visible protectionist instruments. Since the inception of the WTO, the use of a dispute set￾tlement mechanism has become very common, espe￾cially with regard to subsidies, countervailing mea￾sures, and antidumping duties. The accused country needs to correct its protectionist practices once they are ruled WTO-inconsistent, and it also pays a reputational cost when its violations become widely known (Maggi 1999), on top of the monetary cost of engaging in 955 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Sung Eun Kim formal litigation(Davis and Bermeo 2009).These costs One important qualifier warrants a brief discussion. deter member countries from implementing trade bar- A state with strong control over civil society can use riers that may be disputed(Chaudoin.Kucik,and Pelc the media as a protectionist tool more effectively than 2016).With increasing restrictions on the use of pro- states with weaker control over civil society.For in- tectionist instruments.member countries are forced to stance,liberal democracies have a marketplace of ideas abandon their traditional protectionist policies,at the where government-issued information is thoroughly cost of forgoing domestic political benefits,or to risk tested and challenged.Governments in such countries being challenged at the WTO. are less able to collude with the media to hide negative Another option is to find alternative protectionist in- information about domestic firms.Therefore,attempts struments that evade WTO restrictions,which can help to use media as a protectionist instrument would be ob- governments gain domestic political benefits with min- served more often in states with a weak civil society. imal risk.Aside from restricting the flow of imports or offering subsidies,governments can favor domestic firms by promoting the consumption of local products Alternative Explanation:Nationalist Government procurement is one useful instrument, Sentiments but governments can also encourage their citizens to An alternative explanation can be drawn from the buy domestic goods by changing how consumers think demand-side perspective:the media's home bias sim- about national versus foreign products by disseminat- ply reflects economic nationalism among newspa- ing favorable (unfavorable)information about domes- per readers.The demand-side theory of media bias tic(foreign)products.Consumers exposed to biased in- suggests that newspapers,as profit-maximizing firms. formation in favor of domestic products may consume have incentives to offer consumers what they want more domestic products and fewer foreign goods than by distorting stories according to reader preferences they normally would,creating“voluntary” protection- (Gentzkow and Shapiro 2010).According to this per- ist effects spective,newspapers may exhibit bias against foreign As the media represents a key channel through firms when their readers embrace economic national- which consumers gain product-related information ism and hold negative views about foreign economic media outlets serve as potential targets of influence influence.These readers would prefer to read negative for protectionist governments.I suggest two mecha- stories about foreign firms than about domestic firms. nisms by which governments can exert influence over and thus newspapers would be incentivized to provide product-related news coverage.The first is through such coverage to satisfy reader demand. direct censorship.In places where press freedom is This conjecture is consistent with Friebel and Heinz's limited,and especially when governments have direct (2014)finding that German newspapers tend to cover stakes in domestic industries,they can directly suppress the downsizing of foreign firms more intensely and neg- negative stories about domestic companies and prod- atively than local ones.They suggested that this pattern ucts,or indirectly influence news content by providing is driven by consumers'discontent toward the effects news reporting guidelines.For instance,China's central of globalization.Their conclusion was derived from news agency issued directives to state media to focus the biases found in all the newspapers they examined. on strengthening economic propaganda and promoting However,their analysis only examined commercial 5.501g bright economic futures to guide public opinion. newspapers;it thus does not provide guidance for de- The second mechanism is by maintaining a "cozy" termining how a government's protectionist attitudes relationship with the media.Even when formal press might affect news coverage.To better test this demand- freedom is guaranteed,journalists and editors may driven perspective against my own,I outline the follow- have financial and political incentives to abstain from ing hypotheses and test them using a sample of both undermining governmental interests.Some govern- government-owned and commercial newspapers. ments have the authority to appoint top-level man- agers of media companies,so journalists may find it beneficial to maintain a good relationship with the gov- Hypotheses on Media's Home Bias ernment for the sake of their career prospects.Col- The two explanations above suggest the existence of luding with the government can also be profitable for home bias in the media but diverge on the sources media firms,ranging from direct monetary payments of this bias.The two pressures may influence media to administrative decisions or legislative interventions concurrently,which makes it difficult to isolate one that reward more compliant news companies(Besley source from another,but the degree of influence and Prat 2006). should vary. depending on the relative strength of 3 For the leaked directive,see Anne Henochowicz, car purchases,which benefit the FIAT group that had controlled two “Minitrue: national newspapers in Italy(Besley and Prat 2006,721).When gov Keep Reporting on Bright Economic Future,"China Digital Times ernments have direct means of media control,such influence tends to September 10,2015,available at http://chinadigitaltimes.net/2015/09/ occur more directly.For instance,the Chinese government arranged minitrue-keep-reporting-on-bright-economic-future/. its media conglomerations to ensure the growth of more complaint 4 Rewarding news companies through administrative or legislative media outlets.By allowing some party papers to merge with others to intervention is more likely to be employed by governments with- form a conglomerate,sometimes through forced decisions,the gov- out direct means of media control.An example includes the Italian ernment conferred a competitive edge,and oftentimes monolithic government's restriction on car imports and subsidies for domestic power,to these papers(Stockmann 2013,57-8). 956

Sung Eun Kim formal litigation (Davis and Bermeo 2009). These costs deter member countries from implementing trade bar￾riers that may be disputed (Chaudoin, Kucik, and Pelc 2016). With increasing restrictions on the use of pro￾tectionist instruments, member countries are forced to abandon their traditional protectionist policies, at the cost of forgoing domestic political benefits, or to risk being challenged at the WTO. Another option is to find alternative protectionist in￾struments that evade WTO restrictions, which can help governments gain domestic political benefits with min￾imal risk. Aside from restricting the flow of imports or offering subsidies, governments can favor domestic firms by promoting the consumption of local products. Government procurement is one useful instrument, but governments can also encourage their citizens to buy domestic goods by changing how consumers think about national versus foreign products by disseminat￾ing favorable (unfavorable) information about domes￾tic (foreign) products. Consumers exposed to biased in￾formation in favor of domestic products may consume more domestic products and fewer foreign goods than they normally would, creating “voluntary” protection￾ist effects. As the media represents a key channel through which consumers gain product-related information, media outlets serve as potential targets of influence for protectionist governments. I suggest two mecha￾nisms by which governments can exert influence over product-related news coverage. The first is through direct censorship. In places where press freedom is limited, and especially when governments have direct stakes in domestic industries, they can directly suppress negative stories about domestic companies and prod￾ucts, or indirectly influence news content by providing news reporting guidelines. For instance, China’s central news agency issued directives to state media to focus on strengthening economic propaganda and promoting bright economic futures to guide public opinion.3 The second mechanism is by maintaining a “cozy” relationship with the media. Even when formal press freedom is guaranteed, journalists and editors may have financial and political incentives to abstain from undermining governmental interests. Some govern￾ments have the authority to appoint top-level man￾agers of media companies, so journalists may find it beneficial to maintain a good relationship with the gov￾ernment for the sake of their career prospects. Col￾luding with the government can also be profitable for media firms, ranging from direct monetary payments to administrative decisions or legislative interventions that reward more compliant news companies (Besley and Prat 2006).4 3 For the leaked directive, see Anne Henochowicz, “Minitrue: Keep Reporting on Bright Economic Future,” China Digital Times, September 10, 2015, available at http://chinadigitaltimes.net/2015/09/ minitrue-keep-reporting-on-bright-economic-future/. 4 Rewarding news companies through administrative or legislative intervention is more likely to be employed by governments with￾out direct means of media control. An example includes the Italian government’s restriction on car imports and subsidies for domestic One important qualifier warrants a brief discussion. A state with strong control over civil society can use the media as a protectionist tool more effectively than states with weaker control over civil society. For in￾stance,liberal democracies have a marketplace of ideas where government-issued information is thoroughly tested and challenged. Governments in such countries are less able to collude with the media to hide negative information about domestic firms. Therefore, attempts to use media as a protectionist instrument would be ob￾served more often in states with a weak civil society. Alternative Explanation: Nationalist Sentiments An alternative explanation can be drawn from the demand-side perspective: the media’s home bias sim￾ply reflects economic nationalism among newspa￾per readers. The demand-side theory of media bias suggests that newspapers, as profit-maximizing firms, have incentives to offer consumers what they want by distorting stories according to reader preferences (Gentzkow and Shapiro 2010). According to this per￾spective, newspapers may exhibit bias against foreign firms when their readers embrace economic national￾ism and hold negative views about foreign economic influence. These readers would prefer to read negative stories about foreign firms than about domestic firms, and thus newspapers would be incentivized to provide such coverage to satisfy reader demand. This conjecture is consistent with Friebel and Heinz’s (2014) finding that German newspapers tend to cover the downsizing of foreign firms more intensely and neg￾atively than local ones. They suggested that this pattern is driven by consumers’ discontent toward the effects of globalization. Their conclusion was derived from the biases found in all the newspapers they examined. However, their analysis only examined commercial newspapers; it thus does not provide guidance for de￾termining how a government’s protectionist attitudes might affect news coverage. To better test this demand￾driven perspective against my own, I outline the follow￾ing hypotheses and test them using a sample of both government-owned and commercial newspapers. Hypotheses on Media’s Home Bias The two explanations above suggest the existence of home bias in the media but diverge on the sources of this bias. The two pressures may influence media concurrently, which makes it difficult to isolate one source from another, but the degree of influence should vary, depending on the relative strength of car purchases, which benefit the FIAT group that had controlled two national newspapers in Italy (Besley and Prat 2006, 721). When gov￾ernments have direct means of media control, such influence tends to occur more directly. For instance, the Chinese government arranged its media conglomerations to ensure the growth of more complaint media outlets. By allowing some party papers to merge with others to form a conglomerate, sometimes through forced decisions, the gov￾ernment conferred a competitive edge, and oftentimes monolithic power, to these papers (Stockmann 2013, 57-8). 956 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Media Bias against Foreign Firms as a Veiled Trade Barrier each source.I delineate observable implications from ibility deficit"is more likely to be found in their cov- the two perspectives:one that attributes home bias erage of government policies or foreign affairs (where to government influence,and the other that points to the pro-government tendency is more obvious),rather reader preferences as the primary source of home bias. than in their coverage of commercial products.More- My argument is centered on governments'protec- over,recent findings suggest that tightly controlled me- tionist incentives as a driver of media bias.The pres- dia are deemed highly credible by Chinese citizens ence of government-driven bias does not necessarily even when their potential slant is recognized(Zhang. imply the lack of demand-driven bias,but we should Zhou,and Shen 2014;Truex 2016).5 From this discus- expect a different pattern of bias across different news- sion,we can infer that governments would,on balance. papers when governments exert significant influence find it beneficial enough to use government-controlled on home bias,compared to cases when such influence media when they seek to achieve protectionist goals is limited.In the former case,where government in- through media control.We can thus draw the following fluence is an important driver of media bias,media hypothesis based on the expected costs and benefits of outlets under tighter government control would be ex controlling the two types of media: pected to exhibit more bias.But in the latter case, where nationalist sentiment is the principal driver of Hypothesis 1.(Government-driven bias.)Government- media's home bias,commercial newspapers should ex- controlled newspapers are more likely than nongovernment hibit more bias than government-controlled media due media to exhibit bias in favor of domestic companies to the former's profit structure. I expect more bias in government-controlled news- Alternatively,the media's home bias may reflect papers,because the costs of controlling those papers popular discontent toward foreign companies.If are significantly lower than those for controlling economic nationalism represents the main source commercial newspapers.When media outlets are of media's home bias,we should expect commercial financially dependent on or directly owned by the media to exhibit a greater degree of home bias 4r元 government,they have incentives to represent govern- than government-controlled media.As commercial ment interests through their news reporting.In many newspapers are more reliant on circulation numbers cases,top-level editors and managers of newspapers, and advertising sales than government-controlled appointed by the government,tend to have similar media.they have stronger incentives to satisfy reader perspectives on the broad direction of government demand.Thus,commercial newspapers would be more policy.The government can thus easily persuade like- likely to slant their contents against foreign companies minded individuals to publish news stories according to when anti-globalization sentiments are prevalent its guidelines.Even when these individuals personally among their readers.On the other hand,government- disagree with a specific government directive,they are controlled newspapers have weaker incentives to slant under greater pressure to follow the directive because news stories according to popular discontent.They the government has direct influence over their career may exhibit bias to pander to nationalist sentiments, prospects.Commercial newspapers,on the other hand. but only when doing so is congruent with government have far less financial or career incentives to follow interests.From this discussion,we can draw the government directives. following hypothesis. Moreover,the government may expect significant benefits from influencing government-controlled me- Hypothesis 2.(Demand-driven bias.)Commercial newspa- dia.The effects of home bias are larger when the pers are more likely than government-controlled newspa- source has a broader readership and is regarded as pers to exhibit bias in favor of domestic companies. more credible by readers.In terms of readership,a few government-controlled newspapers (e.g.,Refer- These two hypotheses can be tested by comparing ence News and People's Daily)enjoy the largest circu- the degree of bias exhibited by each type of newspaper. lation in China.While regional party papers are often An empirical finding of greater bias in government- less dominant than commercial newspapers in many controlled newspapers would be consistent with the regions,they have nevertheless managed to maintain first hypothesis,indicating a strong presence of gov- fairly broad readership,despite the tradeoff between ernment influence.With commercial newspapers as the level of political bias and the size of readership. a baseline for comparison,the difference in the de- They are made freely available at government de- gree of bias can be attributed to the effects of gov- ernment influence.Yet,this is based on the assump- 四 partments,SOEs,and factories,which improves their brand recognition and circulation.In terms of credibil- tion that government-controlled newspapers are no ity,government-controlled media are not significantly disadvantaged compared to commercial media.While These findings should be taken with caution,given other studies government-controlled media are expected to be less finding the opposite pattern (Stockmann 2013).Nevertheless,the contradictory findings from different studies suggest that neither credible due to their well-known biases.such a"cred- government-controlled nor commercial media enjoy a significant ad- vantage in terms of credibility,at least regarding issue areas where the expectation of pro-government bias is not pronounced.While the Qin,Stromberg,and Wu's(2016)analysis of the Chinese media government may exert greater effort to induce bias in commercial market finds a negative association between political bias and adver- newspapers,expecting greater benefits,such benefits would have to tising revenues,which suggests the elasticity of readers to politically be sufficiently high to offset the high costs of capturing commercial biased content. media. 957

Media Bias against Foreign Firms as a Veiled Trade Barrier each source. I delineate observable implications from the two perspectives: one that attributes home bias to government influence, and the other that points to reader preferences as the primary source of home bias. My argument is centered on governments’ protec￾tionist incentives as a driver of media bias. The pres￾ence of government-driven bias does not necessarily imply the lack of demand-driven bias, but we should expect a different pattern of bias across different news￾papers when governments exert significant influence on home bias, compared to cases when such influence is limited. In the former case, where government in￾fluence is an important driver of media bias, media outlets under tighter government control would be ex￾pected to exhibit more bias. But in the latter case, where nationalist sentiment is the principal driver of media’s home bias, commercial newspapers should ex￾hibit more bias than government-controlled media due to the former’s profit structure. I expect more bias in government-controlled news￾papers, because the costs of controlling those papers are significantly lower than those for controlling commercial newspapers. When media outlets are financially dependent on or directly owned by the government, they have incentives to represent govern￾ment interests through their news reporting. In many cases, top-level editors and managers of newspapers, appointed by the government, tend to have similar perspectives on the broad direction of government policy. The government can thus easily persuade like￾minded individuals to publish news stories according to its guidelines. Even when these individuals personally disagree with a specific government directive, they are under greater pressure to follow the directive because the government has direct influence over their career prospects. Commercial newspapers, on the other hand, have far less financial or career incentives to follow government directives. Moreover, the government may expect significant benefits from influencing government-controlled me￾dia. The effects of home bias are larger when the source has a broader readership and is regarded as more credible by readers. In terms of readership, a few government-controlled newspapers (e.g., Refer￾ence News and People’s Daily) enjoy the largest circu￾lation in China. While regional party papers are often less dominant than commercial newspapers in many regions, they have nevertheless managed to maintain fairly broad readership, despite the tradeoff between the level of political bias and the size of readership.5 They are made freely available at government de￾partments, SOEs, and factories, which improves their brand recognition and circulation. In terms of credibil￾ity, government-controlled media are not significantly disadvantaged compared to commercial media. While government-controlled media are expected to be less credible due to their well-known biases, such a “cred- 5 Qin, Strömberg, and Wu’s (2016) analysis of the Chinese media market finds a negative association between political bias and adver￾tising revenues, which suggests the elasticity of readers to politically biased content. ibility deficit” is more likely to be found in their cov￾erage of government policies or foreign affairs (where the pro-government tendency is more obvious), rather than in their coverage of commercial products. More￾over, recent findings suggest that tightly controlled me￾dia are deemed highly credible by Chinese citizens even when their potential slant is recognized (Zhang, Zhou, and Shen 2014; Truex 2016).6 From this discus￾sion, we can infer that governments would, on balance, find it beneficial enough to use government-controlled media when they seek to achieve protectionist goals through media control.We can thus draw the following hypothesis based on the expected costs and benefits of controlling the two types of media: Hypothesis 1. (Government-driven bias.) Government￾controlled newspapers are more likely than nongovernment media to exhibit bias in favor of domestic companies. Alternatively, the media’s home bias may reflect popular discontent toward foreign companies. If economic nationalism represents the main source of media’s home bias, we should expect commercial media to exhibit a greater degree of home bias than government-controlled media. As commercial newspapers are more reliant on circulation numbers and advertising sales than government-controlled media, they have stronger incentives to satisfy reader demand. Thus, commercial newspapers would be more likely to slant their contents against foreign companies when anti-globalization sentiments are prevalent among their readers. On the other hand, government￾controlled newspapers have weaker incentives to slant news stories according to popular discontent. They may exhibit bias to pander to nationalist sentiments, but only when doing so is congruent with government interests. From this discussion, we can draw the following hypothesis. Hypothesis 2.(Demand-driven bias.) Commercial newspa￾pers are more likely than government-controlled newspa￾pers to exhibit bias in favor of domestic companies. These two hypotheses can be tested by comparing the degree of bias exhibited by each type of newspaper. An empirical finding of greater bias in government￾controlled newspapers would be consistent with the first hypothesis, indicating a strong presence of gov￾ernment influence. With commercial newspapers as a baseline for comparison, the difference in the de￾gree of bias can be attributed to the effects of gov￾ernment influence. Yet, this is based on the assump￾tion that government-controlled newspapers are no 6 These findings should be taken with caution, given other studies finding the opposite pattern (Stockmann 2013). Nevertheless, the contradictory findings from different studies suggest that neither government-controlled nor commercial media enjoy a significant ad￾vantage in terms of credibility, at least regarding issue areas where the expectation of pro-government bias is not pronounced.While the government may exert greater effort to induce bias in commercial newspapers, expecting greater benefits, such benefits would have to be sufficiently high to offset the high costs of capturing commercial media. 957 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Sung Eun Kim more sensitive to demand-side pressures than com- event involving a certain party would indicate its bias mercial newspapers.This is a reasonable assumption toward that party.When a newspaper is found to dis- as government-controlled newspapers are no more re- criminate between domestic and foreign firms in its re liant on reader demand than commercial newspapers, porting of otherwise similar recall events,one can con- and readers of official newspapers are no more na- sider it as evidence of bias.Auto recalls are particularly tionalistic than those of commercial newspapers,as well suited to this study's purpose because they happen will be elaborated later in the section on different frequently and get more media attention than other readership.Contrary to the first potential outcome, product recalls,allowing an empirical examination of an empirical finding of greater bias in commercial reporting patterns over various time periods.I also ex- newspapers would provide support for the second hy- amine the intensity and the tone of news reporting on op//s pothesis.In this case,the difference in the degree of auto recalls as supplementary measures. bias would be attributable to demand-side pressures, given that commercial newspapers are no more subject to government pressure than government-controlled Empirical Scope:News Coverage by newspapers Chinese Newspapers I examine the degree of home bias exhibited by EMPIRICAL STRATEGY the Chinese news media.The empirical focus on China provides unique opportunities for exploring the Measuring Media Bias:News Coverage on sources of media's home bias.Newspapers in China Auto Recalls are under the varying degrees of government control while operating within common economic,social and A key consideration in assessing the degree of me- political environment.All newspapers in China are ul- dia bias is to establish an objective benchmark for timately under state control.yet the degree of con- unbiased reporting.While it is relatively straightfor- trol varies substantially across newspapers.While of- ward to compare newspapers'favorability toward a ficial newspapers are tightly controlled by party orga- given party,it is challenging to set up the standard by nizations,commercially oriented newspapers enjoy a which a newspaper can be considered as biased and to greater space for news reporting than official papers what extent.Yet,establishing the standard is impera- (Stockmann 2013,68-73).Also,the highly localized na- tive because this article aims to assess the degree of ture of the Chinese news industry enables a subna- home bias exhibited by newspapers,rather than simply tional comparison of news reporting.All regional gov- comparing their favorability toward domestic versus ernments have their own official newspapers as well foreign firms as commercial newspapers operating in their localities. I address this challenge by examining a newspaper's These local governments differ in their level of inter- selective reporting behavior:How likely is a newspaper ests in the automobile industry,which allows me to pin 是 to cover the story when a similar type of negative or down the effects of governmental economic interests positive event affects a domestic versus a foreign firm? on news reporting. While an unbiased newspaper would be equally likely In essence,my empirical strategy has three basic to cover negative or positive events involving domestic components:I compare news coverage of auto re- or foreign firms,a newspaper with a home bias might calls (1)by foreign versus domestic producers,(2) selectively omit coverage of negative events affecting across official and commercial newspapers operating in domestic firms while covering positive events,and vice the same province,and(3)across provinces with and versa for foreign firms.It is worth emphasizing that the without their own automotive state-owned enterprises events that serve as a basis for comparison should be (SOEs).By comparing news coverage of foreign ver- similar to each other.Otherwise.one cannot determine sus domestic car recalls,I examine the effects of being whether the difference in reporting pattern is due to foreign while controlling for the type of news content bias or other characteristics of the events,unless they Newspapers may vary with respect to the types of news are adequately accounted for. content (e.g.,hard news versus soft news),but I focus Based on these considerations,I assess the degree on one type of recall-related news and compare a given of home bias by examining the frequency of news re- newspaper's relative tendency to cover foreign versus porting devoted to domestic car recalls relative to for- domestic recalls.Further,I examine the effects of gov- eign ones.Product recalls have obvious negative im- ernment influence by comparing official and commer- 四 plications for the quality of the products in question, cial newspapers.In so doing.I can effectively control and their characteristics are comparable across differ- for other national-or regional-level sources of bias be- ent cases.A newspaper's omission of such a negative cause the sample includes both official and commer- cial newspapers in the same province.Lastly,I compare 7 In either case.empirical support for a given hypothesis does not entirely rule out the possibility of the alternative factor.A find- Even when a newspaper tends to report less on domestic recalls ing consistent with the first hypothesis would not necessarily imply than other newspapers due to its focus on soft news than hard news. the absence of demand-side influence,because commercial newspa- the newspaper is not considered as biased in my analysis as long as pers may still exhibit bias,just to a lesser extent than government- the newspaper does not discriminate domestic and foreign compa- controlled newspapers.Similarly,empirical support for the second nies.The newspaper is considered as biased against foreign compa hypothesis would indicate limited government influence,but only nies only when they report more on foreign recalls relative to domes- relative to demand-side influence. tic recalls. 958

Sung Eun Kim more sensitive to demand-side pressures than com￾mercial newspapers. This is a reasonable assumption as government-controlled newspapers are no more re￾liant on reader demand than commercial newspapers, and readers of official newspapers are no more na￾tionalistic than those of commercial newspapers, as will be elaborated later in the section on different readership. Contrary to the first potential outcome, an empirical finding of greater bias in commercial newspapers would provide support for the second hy￾pothesis. In this case, the difference in the degree of bias would be attributable to demand-side pressures, given that commercial newspapers are no more subject to government pressure than government-controlled newspapers.7 EMPIRICAL STRATEGY Measuring Media Bias: News Coverage on Auto Recalls A key consideration in assessing the degree of me￾dia bias is to establish an objective benchmark for unbiased reporting. While it is relatively straightfor￾ward to compare newspapers’ favorability toward a given party, it is challenging to set up the standard by which a newspaper can be considered as biased and to what extent. Yet, establishing the standard is impera￾tive because this article aims to assess the degree of home bias exhibited by newspapers, rather than simply comparing their favorability toward domestic versus foreign firms. I address this challenge by examining a newspaper’s selective reporting behavior:How likely is a newspaper to cover the story when a similar type of negative or positive event affects a domestic versus a foreign firm? While an unbiased newspaper would be equally likely to cover negative or positive events involving domestic or foreign firms, a newspaper with a home bias might selectively omit coverage of negative events affecting domestic firms while covering positive events, and vice versa for foreign firms. It is worth emphasizing that the events that serve as a basis for comparison should be similar to each other. Otherwise, one cannot determine whether the difference in reporting pattern is due to bias or other characteristics of the events, unless they are adequately accounted for. Based on these considerations, I assess the degree of home bias by examining the frequency of news re￾porting devoted to domestic car recalls relative to for￾eign ones. Product recalls have obvious negative im￾plications for the quality of the products in question, and their characteristics are comparable across differ￾ent cases. A newspaper’s omission of such a negative 7 In either case, empirical support for a given hypothesis does not entirely rule out the possibility of the alternative factor. A find￾ing consistent with the first hypothesis would not necessarily imply the absence of demand-side influence, because commercial newspa￾pers may still exhibit bias, just to a lesser extent than government￾controlled newspapers. Similarly, empirical support for the second hypothesis would indicate limited government influence, but only relative to demand-side influence. event involving a certain party would indicate its bias toward that party. When a newspaper is found to dis￾criminate between domestic and foreign firms in its re￾porting of otherwise similar recall events, one can con￾sider it as evidence of bias. Auto recalls are particularly well suited to this study’s purpose because they happen frequently and get more media attention than other product recalls, allowing an empirical examination of reporting patterns over various time periods. I also ex￾amine the intensity and the tone of news reporting on auto recalls as supplementary measures. Empirical Scope: News Coverage by Chinese Newspapers I examine the degree of home bias exhibited by the Chinese news media. The empirical focus on China provides unique opportunities for exploring the sources of media’s home bias. Newspapers in China are under the varying degrees of government control, while operating within common economic, social and political environment. All newspapers in China are ul￾timately under state control, yet the degree of con￾trol varies substantially across newspapers. While of￾ficial newspapers are tightly controlled by party orga￾nizations, commercially oriented newspapers enjoy a greater space for news reporting than official papers (Stockmann 2013, 68–73).Also, the highly localized na￾ture of the Chinese news industry enables a subna￾tional comparison of news reporting. All regional gov￾ernments have their own official newspapers as well as commercial newspapers operating in their localities. These local governments differ in their level of inter￾ests in the automobile industry, which allows me to pin down the effects of governmental economic interests on news reporting. In essence, my empirical strategy has three basic components: I compare news coverage of auto re￾calls (1) by foreign versus domestic producers, (2) across official and commercial newspapers operating in the same province, and (3) across provinces with and without their own automotive state-owned enterprises (SOEs). By comparing news coverage of foreign ver￾sus domestic car recalls, I examine the effects of being foreign while controlling for the type of news content. Newspapers may vary with respect to the types of news content (e.g., hard news versus soft news), but I focus on one type of recall-related news and compare a given newspaper’s relative tendency to cover foreign versus domestic recalls.8 Further, I examine the effects of gov￾ernment influence by comparing official and commer￾cial newspapers. In so doing, I can effectively control for other national- or regional-level sources of bias be￾cause the sample includes both official and commer￾cial newspapers in the same province. Lastly, I compare 8 Even when a newspaper tends to report less on domestic recalls than other newspapers due to its focus on soft news than hard news, the newspaper is not considered as biased in my analysis as long as the newspaper does not discriminate domestic and foreign compa￾nies. The newspaper is considered as biased against foreign compa￾nies only when they report more on foreign recalls relative to domes￾tic recalls. 958 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Media Bias against Foreign Firms as a Veiled Trade Barrier official newspapers in regions with and without auto agency,the Xinhua News Agency.I exclude newspa- SOEs to uncover the effects of economic interests on pers with a narrow scope,such as International Finance media's home bias.This comparison also helps in miti- News or China Construction Newspaper.I also restrict gating the potential issue of merely comparing official the sample to daily newspapers since nondailies tend and commercial newspapers that may vary in their re- to have different reporting patterns.12 porting patterns. For all newspapers,I collected their ownership in- formation and classified them into two categories:offi- Data cial newspapers and nonofficial newspapers.3 Official newspapers are owned and strictly controlled by party I utilize an original dataset containing information on committees at different administrative levels.CCP divi- 472 auto recalls announced in China and news reports sions,or party-sponsored mass organizations.They rely on these recalls by 121 newspapers. on indirect government subsidies through mandatory subscription by government departments,government- Auto Recalls.I collected information on passenger affiliated organizations,and SOEs,and are consumed car recalls announced in China between 2005 and in offices,classrooms,and factories.Nonofficial news- 2013,including the name of the manufacturer,the es- papers include evening newspapers that are allowed timated number of affected cars,and the reason for more managerial autonomy despite sponsorship from recall.I classified recalls into three categories accord- party committees,as well as commercial newspapers ing to the manufacturer:domestic,joint venture,or for- that are subsidiaries of other newspapers or press eign.The joint-venture category,accounting for 26%of groups.Nonofficial newspapers are distinguished from passenger car recalls,includes cars produced in China official newspapers by their reliance on advertising rev- by foreign investors in partnership with Chinese com- enues and street vendors for circulation.They also have panies(foreign automakers investing in China are al- greater editorial autonomy than official newspapers,as owed to produce vehicles only through a 50-50 split shown in Qin,Stromberg,and Wu's(2016)study on po- 4号 ownership with Chinese partners).The foreign cate- litical bias of Chinese newspapers.The list of newspa- gory,accounting for 62%of recalls,exclusively cap- pers along with their classification is available in Ap- 'asn tures imported vehicles produced abroad by foreign pendix Table A2. automakers.10 Table Al in the Appendix compares the I then collected newspaper articles published by characteristics of recalls across the three types of man- these newspapers that mention an auto recall event,14 ufacturers. and constructed the dataset with newspaper recall as A particularly high share of recalls for the imported a unit of observation.For each observation.I created category is notable especially given their limited mar- a binary indicator Report,scored as 1 if a newspa- ket share in China.While systematic information on per published an article on a given recall event within the recall process is unavailable,foreign firms might be two weeks of the recall announcement and 0 other 是 under higher pressure to recall their products than do- wise,matching the name of the newspaper,the name mestic firms due to uneven enforcement of the quality of the automaker,the date of publication and the date control.My analysis cannot control for unobservable of recall. discrimination in the recall process.but the existence of Table 1 provides an overview of auto-recall report- such discrimination would indicate that recalls of im- ing patterns by official and nonofficial newspapers ported products involve less serious problems.which across different types of recalls.On average,official should receive less media attention.This implies that newspapers tend to write recall-related articles less fre- my estimates of home bias would be a lower estimate quently (13.0%)than nonofficial newspapers (15.6%). of the true effects of home bias. Reporting patterns also vary widely across different Newspapers.I examine news coverage of 121 daily general-interest newspapers,including the state press 12 I include all 120 daily general-interest newspapers available at WiseNews,which provides access to 120 general-interest and 216 spe- cialized newspapers in China.While not covering all Chinese news- Information on recall announcements in China is available at www. papers,it is the most comprehensive Chinese news database.For in qiche365.org.cn from June 2004,after the Provision on Regulations stance,among 35 newspapers listed to operate in Beijing in the 2011 on Defective Automobile Products Recall was introduced in March Chinese Journalism Yearbook,7 are daily general-interest newspa- cassify recalls announced by a joint-venture producer in the pers,all of which are included in the database.While WiseNews cov- ers the whole period under examination(2005-13),my data cover- foreign producer category when the recall announcement explicitly age is necessarily limited to a shorter period when WiseNews's sub. states that the recalled cars are imported ones.This is when the scription to a particular newspaper starts later than 2005 or ends domestic-foreign joint automakers are in charge of recalling cars pro- earlier than 2013.This dataset covers 29 provinces,province-level duced by foreign automakers and then imported to China. municipalities,and autonomous regions,excluding Macau,Guizhou 11 Recalls in China are initiated in response to consumer com- Province,the Inner Mongolia Autonomous Region,and the Tibet plaints to carmakers or the government agency.Industry experts Autonomous Region.The articles by Xinhua News Agency were col- suggest that domestic carmakers are reluctant to publicly an- ed through Factivd. nounce their recalls through the agency and may have "an in- Sponsorship information is from the 2006 Chinese Newspaper side track in fending off pressure from consumers and govern- Directory. ment quality inspectors."See Charles Clover and Sherry Fei Ju," 14 I searched for all newspaper articles that include the word "re- China Car Recalls Tilt Heavily towards Foreign Brands,"Finan call"(zhaohi)in the headline,returning more than 40,000 articles.I cial Times.April 18.2017 available at https://www.ft.com/content/ excluded irrelevant articles that involved nonauto product recalls or 94e6c28a-20c9-11e7-a454-ab04428977f9. that featured the word "recall"in other contexts. 959

Media Bias against Foreign Firms as a Veiled Trade Barrier official newspapers in regions with and without auto SOEs to uncover the effects of economic interests on media’s home bias. This comparison also helps in miti￾gating the potential issue of merely comparing official and commercial newspapers that may vary in their re￾porting patterns. Data I utilize an original dataset containing information on 472 auto recalls announced in China and news reports on these recalls by 121 newspapers. Auto Recalls. I collected information on passenger car recalls announced in China between 2005 and 2013,9 including the name of the manufacturer, the es￾timated number of affected cars, and the reason for recall. I classified recalls into three categories accord￾ing to the manufacturer: domestic, joint venture, or for￾eign. The joint-venture category, accounting for 26% of passenger car recalls, includes cars produced in China by foreign investors in partnership with Chinese com￾panies (foreign automakers investing in China are al￾lowed to produce vehicles only through a 50-50 split ownership with Chinese partners). The foreign cate￾gory, accounting for 62% of recalls, exclusively cap￾tures imported vehicles produced abroad by foreign automakers.10 Table A1 in the Appendix compares the characteristics of recalls across the three types of man￾ufacturers. A particularly high share of recalls for the imported category is notable especially given their limited mar￾ket share in China. While systematic information on the recall process is unavailable, foreign firms might be under higher pressure to recall their products than do￾mestic firms due to uneven enforcement of the quality control.11 My analysis cannot control for unobservable discrimination in the recall process, but the existence of such discrimination would indicate that recalls of im￾ported products involve less serious problems, which should receive less media attention. This implies that my estimates of home bias would be a lower estimate of the true effects of home bias. Newspapers. I examine news coverage of 121 daily general-interest newspapers, including the state press 9 Information on recall announcements in China is available at www. qiche365.org.cn from June 2004, after the Provision on Regulations on Defective Automobile Products Recall was introduced in March 2004. 10 I classify recalls announced by a joint-venture producer in the foreign producer category when the recall announcement explicitly states that the recalled cars are imported ones. This is when the domestic-foreign joint automakers are in charge of recalling cars pro￾duced by foreign automakers and then imported to China. 11 Recalls in China are initiated in response to consumer com￾plaints to carmakers or the government agency. Industry experts suggest that domestic carmakers are reluctant to publicly an￾nounce their recalls through the agency and may have “an in￾side track in fending off pressure from consumers and govern￾ment quality inspectors.” See Charles Clover and Sherry Fei Ju, “ China Car Recalls Tilt Heavily towards Foreign Brands,” Finan￾cial Times, April 18, 2017, available at https://www.ft.com/content/ 94e6c28a-20c9-11e7-a454-ab04428977f9. agency, the Xinhua News Agency. I exclude newspa￾pers with a narrow scope, such as International Finance News or China Construction Newspaper. I also restrict the sample to daily newspapers since nondailies tend to have different reporting patterns.12 For all newspapers, I collected their ownership in￾formation and classified them into two categories: offi￾cial newspapers and nonofficial newspapers.13 Official newspapers are owned and strictly controlled by party committees at different administrative levels,CCP divi￾sions, or party-sponsored mass organizations. They rely on indirect government subsidies through mandatory subscription by government departments, government￾affiliated organizations, and SOEs, and are consumed in offices, classrooms, and factories. Nonofficial news￾papers include evening newspapers that are allowed more managerial autonomy despite sponsorship from party committees, as well as commercial newspapers that are subsidiaries of other newspapers or press groups. Nonofficial newspapers are distinguished from official newspapers by their reliance on advertising rev￾enues and street vendors for circulation.They also have greater editorial autonomy than official newspapers, as shown in Qin, Strömberg, and Wu’s (2016) study on po￾litical bias of Chinese newspapers. The list of newspa￾pers along with their classification is available in Ap￾pendix Table A2. I then collected newspaper articles published by these newspapers that mention an auto recall event,14 and constructed the dataset with newspaper recall as a unit of observation. For each observation, I created a binary indicator Report, scored as 1 if a newspa￾per published an article on a given recall event within two weeks of the recall announcement and 0 other￾wise, matching the name of the newspaper, the name of the automaker, the date of publication and the date of recall. Table 1 provides an overview of auto-recall report￾ing patterns by official and nonofficial newspapers across different types of recalls. On average, official newspapers tend to write recall-related articles less fre￾quently (13.0%) than nonofficial newspapers (15.6%). Reporting patterns also vary widely across different 12 I include all 120 daily general-interest newspapers available at WiseNews,which provides access to 120 general-interest and 216 spe￾cialized newspapers in China. While not covering all Chinese news￾papers, it is the most comprehensive Chinese news database. For in￾stance, among 35 newspapers listed to operate in Beijing in the 2011 Chinese Journalism Yearbook, 7 are daily general-interest newspa￾pers, all of which are included in the database. While WiseNews cov￾ers the whole period under examination (2005–13), my data cover￾age is necessarily limited to a shorter period when WiseNews’s sub￾scription to a particular newspaper starts later than 2005 or ends earlier than 2013. This dataset covers 29 provinces, province-level municipalities, and autonomous regions, excluding Macau, Guizhou Province, the Inner Mongolia Autonomous Region, and the Tibet Autonomous Region. The articles by Xinhua News Agency were col￾lected through Factiva. 13 Sponsorship information is from the 2006 Chinese Newspaper Directory. 14 I searched for all newspaper articles that include the word “re￾call” (zhaohui) in the headline, returning more than 40,000 articles. I excluded irrelevant articles that involved nonauto product recalls or that featured the word “recall” in other contexts. 959 Downloaded from https://www.cambridge.org/core. 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Sung Eun Kim TABLE 1.Summary Statistics of Auto-Recall Reporting Official Newspapers Nonofficial Newspapers Min Mean Max. Min. Mean Max. Total 0.0% 13.0% 66.1% 0.0% 15.6% 61.7% By Recall Size and Manufacturer Small-Scale Recalls (#10,000) Domestic 0.0% 10.0% 57.6% 0.0% 12.1% 63.6% Joint Venture 0.0% 11.7% 59.6% 0.0% 16.2% 57.9% Foreign 0.0% 12.2% 66.9% 0.0% 13.3% 62.4% Large-Scale Recalls(#>10,000) Domestic 0.0% 11.2% 45.5% 0.0% 16.0% 59.1% Joint Venture 0.0% 18.5% 77.8% 0.0% 23.5% 80.0% Foreign 0.0% 21.6% 100.0% 0.0% 27.6% 100.0% By Recall Type Electrical System 0.0% 13.8% 68.5% 0.0% 17.4% 64.0% Engine 0.0% 13.1% 65.1% 0.0% 14.8% 64.2% Steering 0.0% 12.9% 67.6% 0.0% 15.5% 62.2% Brake 0.0% 13.8% 65.3% 0.0% 14.7% 68.8% Note:Entries indicate the statistics for the proportion of recalls covered by a newspaper out of all recalls. The statistics are based on the observations of 121 newspapers. types of recalls.Large-scale recalls receive more me- EMPIRICAL ANALYSIS dia attention than small-scale recalls across newspa- & pers.Reasons for recalls(e.g.,defects in engine,steer- Media Bias against Foreign Firms: ing,or electrical system)may also account for some Government-Driven versus Demand-Driven variations in the reporting pattern.On the crucial ques- tion of whether newspapers distinguish between do- I first examine whether newspapers are more likely to mestic and foreign automakers,both official and nonof- cover recalls involving foreign automakers than recalls ficial newspapers seem to pay more attention to recalls involving domestic ones.In this analysis,the dependent by foreign automakers than the ones by domestic or variable Yikr is a binary indicator Report that is coded joint-venture producers.For the case of large-scale re- 1 if the newspaper i located in a province j published calls,official newspapers report 11.2%of domestic car a news story about the recall event k announced in a recalls on average,but the figure is double for foreign time periodt,and 0 otherwise.I use the binary indicator car recalls (21.6%).Likewise,nonofficial newspapers because most recall events are covered only once by 235.5010 on average report more on foreign car recalls(276%) each newspaper.The binary probit models are specified than domestic ones (16.0%). as follows: This comparison between official and nonofficial newspapers may lead one to conclude that both types Pr(Yijk =1)=(a+B Foreignk B2Officiali of newspapers exhibit bias toward domestic compa- nies by underreporting their recalls.Nonetheless,a few +B3Official*Foreignik considerations should be made prior to drawing such +8Zk+4j+), a conclusion.First,one should account for confound- ing factors (e.g.,severity of recalls,reasons for recalls, where Foreign is a binary indicator for imported for- or temporal trend)that may explain such underreport- eign cars;Official is a binary indicator for official ing of domestic recalls.These factors may account for newspapers;vector Z denotes recall-level control vari- the seeming domestic-foreign distinction by either or ables;u is a vector of province fixed effects;and r both types of newspapers.The next section will exam- is a vector of half-year fixed effects.In construct- ine which type of newspapers exhibit a biased tendency, ing the binary indicator Foreign,I treat both do- if any,even when these factors are controlled.Second, mestic firms and domestic-foreign joint ventures as one should note the substantial variation of reporting nonforeign automakers because domestic companies patterns even within the same type of newspapers.As have at least a 50%stake in the operation of joint will be discussed,some official newspapers have a sig- ventures.15 nificantly greater incentive to protect the domestic au- The main parameters of interest are B1,the coeffi- tomobile industry than other official newspapers.The cient for Foreign,denoting a degree of bias exhibited by next section will examine whether such a difference commercial newspapers,and B3,the coefficient for the in protectionist incentives can account for reporting patterns across official newspapers,in a way consistent with the theoretical expectation. 15 I also estimate the models separating purely domestic companies from joint-venture companies,as presented in Appendix Table A17 960

Sung Eun Kim TABLE 1. Summary Statistics of Auto-Recall Reporting Official Newspapers Nonofficial Newspapers Min. Mean Max. Min. Mean Max. Total 0.0% 13.0% 66.1% 0.0% 15.6% 61.7% By Recall Size and Manufacturer Small-Scale Recalls (# 10,000) Domestic 0.0% 11.2% 45.5% 0.0% 16.0% 59.1% Joint Venture 0.0% 18.5% 77.8% 0.0% 23.5% 80.0% Foreign 0.0% 21.6% 100.0% 0.0% 27.6% 100.0% By Recall Type Electrical System 0.0% 13.8% 68.5% 0.0% 17.4% 64.0% Engine 0.0% 13.1% 65.1% 0.0% 14.8% 64.2% Steering 0.0% 12.9% 67.6% 0.0% 15.5% 62.2% Brake 0.0% 13.8% 65.3% 0.0% 14.7% 68.8% Note: Entries indicate the statistics for the proportion of recalls covered by a newspaper out of all recalls. The statistics are based on the observations of 121 newspapers. types of recalls. Large-scale recalls receive more me￾dia attention than small-scale recalls across newspa￾pers. Reasons for recalls (e.g., defects in engine, steer￾ing, or electrical system) may also account for some variations in the reporting pattern.On the crucial ques￾tion of whether newspapers distinguish between do￾mestic and foreign automakers, both official and nonof￾ficial newspapers seem to pay more attention to recalls by foreign automakers than the ones by domestic or joint-venture producers. For the case of large-scale re￾calls, official newspapers report 11.2% of domestic car recalls on average, but the figure is double for foreign car recalls (21.6%). Likewise, nonofficial newspapers on average report more on foreign car recalls (27.6%) than domestic ones (16.0%). This comparison between official and nonofficial newspapers may lead one to conclude that both types of newspapers exhibit bias toward domestic compa￾nies by underreporting their recalls. Nonetheless, a few considerations should be made prior to drawing such a conclusion. First, one should account for confound￾ing factors (e.g., severity of recalls, reasons for recalls, or temporal trend) that may explain such underreport￾ing of domestic recalls. These factors may account for the seeming domestic-foreign distinction by either or both types of newspapers. The next section will exam￾ine which type of newspapers exhibit a biased tendency, if any, even when these factors are controlled. Second, one should note the substantial variation of reporting patterns even within the same type of newspapers. As will be discussed, some official newspapers have a sig￾nificantly greater incentive to protect the domestic au￾tomobile industry than other official newspapers. The next section will examine whether such a difference in protectionist incentives can account for reporting patterns across official newspapers, in a way consistent with the theoretical expectation. EMPIRICAL ANALYSIS Media Bias against Foreign Firms: Government-Driven versus Demand-Driven I first examine whether newspapers are more likely to cover recalls involving foreign automakers than recalls involving domestic ones. In this analysis, the dependent variable Yijkt is a binary indicator Report that is coded 1 if the newspaper i located in a province j published a news story about the recall event k announced in a time period t, and 0 otherwise. I use the binary indicator because most recall events are covered only once by each newspaper.The binary probit models are specified as follows: Pr(Yi jkt = 1) = (α + β1Foreignk + β2Officiali + β3Official*Foreignik + δZk + μj + τt), where Foreign is a binary indicator for imported for￾eign cars; Official is a binary indicator for official newspapers; vector Z denotes recall-level control vari￾ables; μ is a vector of province fixed effects; and τ is a vector of half-year fixed effects. In construct￾ing the binary indicator Foreign, I treat both do￾mestic firms and domestic-foreign joint ventures as nonforeign automakers because domestic companies have at least a 50% stake in the operation of joint ventures.15 The main parameters of interest are β1, the coeffi￾cient for Foreign, denoting a degree of bias exhibited by commercial newspapers, and β3, the coefficient for the 15 I also estimate the models separating purely domestic companies from joint-venture companies, as presented in Appendix Table A17. 960 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Media Bias against Foreign Firms as a Veiled Trade Barrier TABLE 2. Probit Models Estimating News Coverage Probability of Auto Recalls (1) (2) (3) (4) (5) (6) (7) (8) 0081400006/L0LoL Foreign 0.037* 0.027* 0.027* 0.037* 0.028* 0.026* (0.013) (0.013) (0.013) (0.013) (0.013) (0.013) Official -0.011* -0.029* -0.041* (0.004) (0.006) (0.006) Official Foreign 0.031林 0.030* 0.034* (0.009) (0.009) (0.009) Central Party Official 0.021* -0.034* -0.131* (0.009) (0.012) (0.006) Central Party Official* 0.101* 0.096* 0.140* Foreign (0.021) (0.020) (0.033) Regional Party Official -0.017* 0.028* -0.010 (0.004) (0.006) (0.006 Regional Party Official* 0.019* 0.021* 0.021* Foreign (0.009) (0.009) (0.009) Province FE No No Yes No No No Yes No Newspaper FE No No No Yes No No No Yes Half-year FE No No Yes No No No Yes No Recall FE No No No Yes No No No Yes Observations 35246 35246 35246 32758 35246 35246 35246 32758 Marginal effects;standard errors clustered by recalls in parentheses All models include recall-level controls:the logarithm of recall size and binary indicators of recall types p<0.10,*p<0.05.+p<0.01 interaction term of Official and Foreign,indicating an theses.16 The results suggest that foreign recalls gener- additional degree of bias exhibited by official newspa- ally receive more media coverage,and official newspa- pers.If the media's home bias simply reflects economic pers drive this tendency.Foreign appears to be positive nationalism of readers,we should observe the bias pri- and significant at the 0.01 level in the first model,yet 是 marily in nonofficial newspapers(positive and statis- its significance becomes weaker when its interaction tically significant B1),but there is no reason to expect term with the Official variable is added in models 2-4. official newspapers to exhibit an additional degree of The interaction term is always positive and statistically bias,meaning that B3 should not appear to be positive significant at the 0.01 level.This suggests that official and statistically significant.In contrast,if the media's newspapers are more likely to report foreign recalls home bias primarily reflects the government's inter- than domestic recalls,while such a tendency is far less est in protecting domestic industry,we should observe pronounced in nonofficial papers. the bias more from official newspapers,meaning that To further investigate the mechanism by which home B3 should be positive and statistically significant.This bias occurs,I estimate additional models presented in would imply that official newspapers tend to selectively columns 5-8,where I include separate indicators for report recalls of imported cars to a greater extent than Central Party Official and Regional Party Official and commercial newspapers. their interaction terms with Foreign.Official newspa- The specification controls for Recall Size (Logged), pers have different sponsoring institutions,from the the logged number of affected cars in each recall inci- central party to various province or municipal-level dent,since a recall involving more cars would attract parties.As the central party is the main decision-maker more media attention,and seven binary indicators of dealing with trade liberalization,it would be under recall types (e.g.,engine,brake,or electrical system), more pressure from interest groups seeking protection. because some types may receive more coverage than Also,the Chinese automobile industry is dominated by others.Across the models,I either include province- state-owned companies,majority of which are owned specific or newspaper-specific fixed effects.I also in- by the central party7 According to the government- clude either half-year-specific or recall-specific fixed ef- driven bias hypothesis,then,central-party-controlled fects.Standard error is clustered by recall to account for the dependence between different newspapers'obser- 16 To economize the space,I present the estimation results only for vations of the same recall event.As a robustness test. key variables of interest throughout the paper.The full results,in- I employ a two-way clustering by province and recall cluding for the control variables,are presented in Appendix Section (see Appendix Table A15). mone the 47 passenger car companies listed in the 2009Ch /:sony Table 2 presents the estimation results with marginal Large Corporation Yearbook,22 are owned by the State-owned As- effects in the main entries and standard errors in paren- sets Supervision and Administration Commission(SASAC)of the State Council,or their joint venture with foreign companies,16 are 961

Media Bias against Foreign Firms as a Veiled Trade Barrier TABLE 2. Probit Models Estimating News Coverage Probability of Auto Recalls (1) (2) (3) (4) (5) (6) (7) (8) Foreign 0.037∗∗ 0.027∗ 0.027∗ 0.037∗∗ 0.028∗ 0.026∗ (0.013) (0.013) (0.013) (0.013) (0.013) (0.013) Official − 0.011∗∗ − 0.029∗∗ − 0.041∗∗ (0.004) (0.006) (0.006) Official ∗ Foreign 0.031∗∗ 0.030∗∗ 0.034∗∗ (0.009) (0.009) (0.009) Central Party Official 0.021∗ − 0.034∗∗ − 0.131∗∗ (0.009) (0.012) (0.006) Central Party Official ∗ 0.101∗∗ 0.096∗∗ 0.140∗∗ Foreign (0.021) (0.020) (0.033) Regional Party Official − 0.017∗∗ − 0.028∗∗ − 0.010 (0.004) (0.006) (0.006) Regional Party Official ∗ 0.019∗ 0.021∗ 0.021∗ Foreign (0.009) (0.009) (0.009) Province FE No No Yes No No No Yes No Newspaper FE No No No Yes No No No Yes Half-year FE No No Yes No No No Yes No Recall FE No No No Yes No No No Yes Observations 35246 35246 35246 32758 35246 35246 35246 32758 Marginal effects; standard errors clustered by recalls in parentheses. All models include recall-level controls: the logarithm of recall size and binary indicators of recall types. + p < 0.10, ∗ p < 0.05, ∗∗ p < 0.01 interaction term of Official and Foreign, indicating an additional degree of bias exhibited by official newspa￾pers. If the media’s home bias simply reflects economic nationalism of readers, we should observe the bias pri￾marily in nonofficial newspapers (positive and statis￾tically significant β1), but there is no reason to expect official newspapers to exhibit an additional degree of bias, meaning that β3 should not appear to be positive and statistically significant. In contrast, if the media’s home bias primarily reflects the government’s inter￾est in protecting domestic industry, we should observe the bias more from official newspapers, meaning that β3 should be positive and statistically significant. This would imply that official newspapers tend to selectively report recalls of imported cars to a greater extent than commercial newspapers. The specification controls for Recall Size (Logged), the logged number of affected cars in each recall inci￾dent, since a recall involving more cars would attract more media attention, and seven binary indicators of recall types (e.g., engine, brake, or electrical system), because some types may receive more coverage than others. Across the models, I either include province￾specific or newspaper-specific fixed effects. I also in￾clude either half-year-specific or recall-specific fixed ef￾fects. Standard error is clustered by recall to account for the dependence between different newspapers’ obser￾vations of the same recall event. As a robustness test, I employ a two-way clustering by province and recall (see Appendix Table A15). Table 2 presents the estimation results with marginal effects in the main entries and standard errors in paren￾theses.16 The results suggest that foreign recalls gener￾ally receive more media coverage, and official newspa￾pers drive this tendency. Foreign appears to be positive and significant at the 0.01 level in the first model, yet its significance becomes weaker when its interaction term with the Official variable is added in models 2–4. The interaction term is always positive and statistically significant at the 0.01 level. This suggests that official newspapers are more likely to report foreign recalls than domestic recalls, while such a tendency is far less pronounced in nonofficial papers. To further investigate the mechanism by which home bias occurs, I estimate additional models presented in columns 5–8, where I include separate indicators for Central Party Official and Regional Party Official and their interaction terms with Foreign. Official newspa￾pers have different sponsoring institutions, from the central party to various province or municipal-level parties. As the central party is the main decision-maker dealing with trade liberalization, it would be under more pressure from interest groups seeking protection. Also, the Chinese automobile industry is dominated by state-owned companies, majority of which are owned by the central party.17 According to the government￾driven bias hypothesis, then, central-party-controlled 16 To economize the space, I present the estimation results only for key variables of interest throughout the paper. The full results, in￾cluding for the control variables, are presented in Appendix Section A2. 17 Among the 47 passenger car companies listed in the 2009 China Large Corporation Yearbook, 22 are owned by the State-owned As￾sets Supervision and Administration Commission (SASAC) of the State Council, or their joint venture with foreign companies, 16 are 961 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242

Sung Eun Kim FIGURE 1.Predicted Probability of Reporting a Recall Event by Newspaper Type Central Party Official Regional Party Official Non-Official 0 9 4. 681012 14 2 468101214 468101214 Log (Recall Size) Log(Recall Size) Log (Recall Size) -Foreign Recalls --Domestic Recalls newspapers would exhibit more bias against foreign for central party officials,followed by regional party 4号 automakers than regional official newspapers. officials.For example,consider a recall involving 1,100 The estimation results in columns 5-8 are consistent cars (In(1,100)7).While a central-party-sponsored with this hypothesis:central-party-controlled newspa- newspaper has a 12.5%probability of reporting & pers are more likely to cover foreign recalls than do- the recall by a domestic automaker,this probability mestic ones.The estimated coefficient for the variable almost doubles to 23.9%for a foreign automaker Central Party Official Foreign is always statistically A regional official newspaper has,on average,a significant at the 0.01 level and substantively meaning- 13.0%probability of reporting a domestic recall and ful in the expected direction.The estimated coefficient a 171%probability of reporting a foreign recall.The for the variable Regional Party Officials Foreign is substantive effect of an automaker being foreign is positive and statistically significant,but its magnitude marginal in a commercial newspaper that has,on is much smaller.18 average,a 15.4%of probability of covering a domestic I assess the substantive effects of an automaker be- recall and a 20.0%probability of covering a foreign ing foreign across three types of newspapers.Figure 1 one,holding all other characteristics constant.20 describes the predicted probability that each type of Next,I employ two additional measures of media newspaper covers a recall event depending on the bias,intensity and tone of reporting.Newspapers with recall size and the domestic/foreign classification.19 a home bias would provide more intensive coverage of Holding the size of a recall and other factors constant, recalls involving foreign cars and may report them in all three types are more likely to report foreign recalls, a more negative light.For instance,Guangzhou Daily but the substantive effect appears to be the largest published a lengthy news report on BMW's recall an- nouncement in August 2010,questioning whether the owned by the SASAC of the provincial/municipal level parties or delay in the announcement is due to their unfair treat- their joint venture with foreign companies.The rest are privately ment of Chinese consumers.This contrasts with Bei- owned.I collected ownership information from companies'annual jing Daily's brief coverage of the domestic car com- reports available at the Shanghai Stock Exchange (http://www.sse pany Dongfeng's recall decision in May 2009.This re- com.cn),the Shenzhen Stock Exchange (http://www.szse.cn/main/) port simply covered factual information on the affected and companies'own websites. 18 The interaction term captures the relative strength of bias exhib models and recall procedures (see Appendix Section ited by central or regional official media relative to nonofficial ones A1.3 for the full texts). I conduct an additional set of analyses by splitting the sample into central party officials,regional party officials,and commercial news- papers.This allows a coefficient for Foreign to vary for different sam 20 I find a similar substantive effect when I analyze a proportion of ples,providing an estimate of absolute degree of home bias exhibited foreign recall-related news reports to all recall reports,based on an by each type of newspapers.The results presented in Appendix Table A8 are similar to the results from the main models,showing that the beproporti o pr magnitude of Foreign appears to be the most substantial for central cials,and by0.05 for regional party officials,compared to commercial party official newspapers,followed by regional party official news- newspapers.The estimate for regional party officials is smaller than papers.The effect of Foreign is smallest for commercial newspapers. for central party officials and not statistically significant.This is in This suggests that the degree of home bias exhibited by commercial part due to the variation in the degree of bias across regions.While The probability is calculated with 1000 simulations based on all central party officials have strong protectionist incentives and ex hibit the strongest bias,there is a substantial variation in regional Model 6,with engine as the recall type. governmental interests,as further examined in the next section. 962

Sung Eun Kim FIGURE 1. Predicted Probability of Reporting a Recall Event by Newspaper Type 0 .1 .2 .3 .4 .5 .6 Predicted Probability of News Coverage 0 2 4 6 8 10 12 14 Log (Recall Size) Central Party Official 0 .1 .2 .3 .4 .5 .6 Predicted Probability of News Coverage 0 2 4 6 8 10 12 14 Log (Recall Size) Regional Party Official 0 .1 .2 .3 .4 .5 .6 Predicted Probability of News Coverage 0 2 4 6 8 10 12 14 Log (Recall Size) Non-Official Foreign Recalls Domestic Recalls newspapers would exhibit more bias against foreign automakers than regional official newspapers. The estimation results in columns 5–8 are consistent with this hypothesis: central-party-controlled newspa￾pers are more likely to cover foreign recalls than do￾mestic ones. The estimated coefficient for the variable Central Party Official ∗ Foreign is always statistically significant at the 0.01 level and substantively meaning￾ful in the expected direction. The estimated coefficient for the variable Regional Party Officials ∗ Foreign is positive and statistically significant, but its magnitude is much smaller.18 I assess the substantive effects of an automaker be￾ing foreign across three types of newspapers. Figure 1 describes the predicted probability that each type of newspaper covers a recall event depending on the recall size and the domestic/foreign classification.19 Holding the size of a recall and other factors constant, all three types are more likely to report foreign recalls, but the substantive effect appears to be the largest owned by the SASAC of the provincial/municipal level parties or their joint venture with foreign companies. The rest are privately owned. I collected ownership information from companies’ annual reports available at the Shanghai Stock Exchange (http://www.sse. com.cn), the Shenzhen Stock Exchange (http://www.szse.cn/main/), and companies’ own websites. 18 The interaction term captures the relative strength of bias exhib￾ited by central or regional official media relative to nonofficial ones. I conduct an additional set of analyses by splitting the sample into central party officials, regional party officials, and commercial news￾papers. This allows a coefficient for Foreign to vary for different sam￾ples, providing an estimate of absolute degree of home bias exhibited by each type of newspapers.The results presented in Appendix Table A8 are similar to the results from the main models, showing that the magnitude of Foreign appears to be the most substantial for central party official newspapers, followed by regional party official news￾papers. The effect of Foreign is smallest for commercial newspapers. This suggests that the degree of home bias exhibited by commercial newspapers is marginal. 19 The probability is calculated with 1,000 simulations based on Model 6, with engine as the recall type. for central party officials, followed by regional party officials. For example, consider a recall involving 1,100 cars (ln(1, 100) ≈ 7). While a central-party-sponsored newspaper has a 12.5% probability of reporting the recall by a domestic automaker, this probability almost doubles to 23.9% for a foreign automaker. A regional official newspaper has, on average, a 13.0% probability of reporting a domestic recall and a 17.1% probability of reporting a foreign recall. The substantive effect of an automaker being foreign is marginal in a commercial newspaper that has, on average, a 15.4% of probability of covering a domestic recall and a 20.0% probability of covering a foreign one, holding all other characteristics constant.20 Next, I employ two additional measures of media bias, intensity and tone of reporting. Newspapers with a home bias would provide more intensive coverage of recalls involving foreign cars and may report them in a more negative light. For instance, Guangzhou Daily published a lengthy news report on BMW’s recall an￾nouncement in August 2010, questioning whether the delay in the announcement is due to their unfair treat￾ment of Chinese consumers. This contrasts with Bei￾jing Daily’s brief coverage of the domestic car com￾pany Dongfeng’s recall decision in May 2009. This re￾port simply covered factual information on the affected models and recall procedures (see Appendix Section A1.3 for the full texts). 20 I find a similar substantive effect when I analyze a proportion of foreign recall-related news reports to all recall reports, based on an aggregate measure for each newspaper. As presented in Appendix Table A9, this proportion is higher by 0.13 for central party offi￾cials, and by 0.05 for regional party officials, compared to commercial newspapers. The estimate for regional party officials is smaller than for central party officials and not statistically significant. This is in part due to the variation in the degree of bias across regions. While all central party officials have strong protectionist incentives and ex￾hibit the strongest bias, there is a substantial variation in regional governmental interests, as further examined in the next section. 962 Downloaded from https://www.cambridge.org/core. 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Media Bias against Foreign Firms as a Veiled Trade Barrier TABLE 3. Length and Sentiment of Article as Dependent Variable (1) (2) (3) (4) (5) (6) Central Party Official Regional Party Official Nonofficial DV:Article Length Foreign 21.540 28.187+ 14.890 12.453 7.498 6.180 (15.507 (16.261) (10.547) (10.206 (8.689) (8.106) DV:Negative Sentiment Foreign 0.007* 0.007+ 0.012 0.011林 0.012* 0.012* (0.004) (0.004) (0.002) (0.002) (0.001) (0.001) Newspaper FE Yes Yes Yes Yes Yes Yes Half-year FE No Yes No Yes No Yes Observations 307 307 1234 1234 3193 3193 Marginal effects:standard errors clustered by reporting weeks in parentheses. All models include recall-related controls. +p<0.10,*p<0.05,*p<0.01 I test whether such a biased tendency is systemati- newspapers cover foreign recalls more negatively than cally observed in the collected data.Focusing on those domestic ones,the substantive effects are marginal.The cases in which newspapers covered a recall event,21 I difference of 0.01 in the score indicates 1%more nega- 4号 estimate the effects of being Foreign on two dependent tive words.In part,this reflects that recall-related news variables:(1)the number of words per article (Article articles are usually not emotionally charged.A recall- 'asn Length)and(2)the difference between negative and related article on average contains only 3.8%(4.4%) & positive words as a proportion of the article (Nega- of negative (positive)words.This implies that home tive).2 Specifically,I estimate the following model: bias is expressed in a subtle way,which may work bet- ter than an explicit discrimination because (1)readers Article Lengthik (Negativeik) may not buy into emotionally charged articles espe- =a B Foreignk +8Zk ui+t Eikt. cially when they are aware of potential bias,and(2) newspapers can discriminate against foreign compa- where Z denotes recall-level control variables.A vector nies without leaving concrete evidence of bias,which of newspaper fixed effects,u,and a vector of half-year might be of more concerns for central party newspa- fixed effects,r,are also included. pers that receive more attention from foreign audience. Table 3 presents the results,separately,for each type On the whole,I find evidence of a home bias in offi- of newspaper.Central party officials tend to publish cial newspapers,especially those controlled by the cen- significantly longer stories on foreign auto recalls.Ac- tral party,and limited evidence for bias among nonof- cording to the second model,they write on average ficial newspapers.An auto recall does not always make about 28 more words per article on foreign recalls than it into the newspaper headlines,yet whether the firm on domestic recalls (about 13%longer than their av- in question is domestic or foreign appears to have a erage length).For other newspapers,the effect of for- considerable effect on whether the recall receives news eignness is positive,but its magnitude is smaller and not coverage,especially by official newspapers.In addition statistically significant at the conventional level. to bias in the news selection stage,foreign firms are With regard to sentiment,the results indicate that all subject to additional forms of home bias as they re- types of newspapers report foreign recalls in a more ceive lengthier and more negative coverage,albeit in negative light,although to a marginal degree.For cen- a subtle way.The evidence presented here is consistent tral party officials,the sentiment score for foreign re- with the government-driven bias hypothesis.Although call reports is on average higher by 0.007 than domestic the finding does not completely rule out the influence recall reports.The estimated coefficient is 0.012 for re- of demand-side pressures,the additional degree of bias gional party officials and nonofficials.While all types of found in official newspapers compared to commercial newspapers suggests the presence of government influ- ence in shaping the biased coverage. 21 My analysis includes 4.734 recall-related news reports.This ex. cludes 572 reports that cover recalls of both imported and domes- theuerfter segmeting the sntence State-Owned Enterprises and using the Stanford Word Segmenter(Chang,Galley,and Manning Party-Controlled Papers 2008).For negative and positive words in Chinese language,I used The previous section demonstrated that regional the NTU Sentiment Dictionary (Ku and Chen 2007).I calculated the proportion of negative and positive words per article,and took the official newspapers are less biased.However,some difference between the two.The positive (negative)score indicates regional governments have a greater interest in the more negative (positive)words than positive (negative)words. automobile industry than others because they own 963

Media Bias against Foreign Firms as a Veiled Trade Barrier TABLE 3. Length and Sentiment of Article as Dependent Variable (1) (2) (3) (4) (5) (6) Central Party Official Regional Party Official Nonofficial DV: Article Length Foreign 21.540 28.187+ 14.890 12.453 7.498 6.180 (15.507) (16.261) (10.547) (10.206) (8.689) (8.106) DV: Negative Sentiment Foreign 0.007∗ 0.007+ 0.012∗∗ 0.011∗∗ 0.012∗∗ 0.012∗∗ (0.004) (0.004) (0.002) (0.002) (0.001) (0.001) Newspaper FE Yes Yes Yes Yes Yes Yes Half-year FE No Yes No Yes No Yes Observations 307 307 1234 1234 3193 3193 Marginal effects; standard errors clustered by reporting weeks in parentheses. All models include recall-related controls. + p < 0.10, ∗ p < 0.05, ∗∗ p < 0.01 I test whether such a biased tendency is systemati￾cally observed in the collected data. Focusing on those cases in which newspapers covered a recall event,21 I estimate the effects of being Foreign on two dependent variables: (1) the number of words per article (Article Length) and (2) the difference between negative and positive words as a proportion of the article (Nega￾tive).22 Specifically, I estimate the following model: Article Lengthikt (Negativeikt) = α + β1Foreignk + δZk + μi + τt + ikt, where Z denotes recall-level control variables.A vector of newspaper fixed effects, μ, and a vector of half-year fixed effects, τ , are also included. Table 3 presents the results, separately, for each type of newspaper. Central party officials tend to publish significantly longer stories on foreign auto recalls. Ac￾cording to the second model, they write on average about 28 more words per article on foreign recalls than on domestic recalls (about 13% longer than their av￾erage length). For other newspapers, the effect of for￾eignness is positive, but its magnitude is smaller and not statistically significant at the conventional level. With regard to sentiment, the results indicate that all types of newspapers report foreign recalls in a more negative light, although to a marginal degree. For cen￾tral party officials, the sentiment score for foreign re￾call reports is on average higher by 0.007 than domestic recall reports. The estimated coefficient is 0.012 for re￾gional party officials and nonofficials.While all types of 21 My analysis includes 4,734 recall-related news reports. This ex￾cludes 572 reports that cover recalls of both imported and domes￾tically produced cars in a single piece. 22 I counted the number of words after segmenting the sentence using the Stanford Word Segmenter (Chang, Galley, and Manning 2008). For negative and positive words in Chinese language, I used the NTU Sentiment Dictionary (Ku and Chen 2007). I calculated the proportion of negative and positive words per article, and took the difference between the two. The positive (negative) score indicates more negative (positive) words than positive (negative) words. newspapers cover foreign recalls more negatively than domestic ones, the substantive effects are marginal.The difference of 0.01 in the score indicates 1% more nega￾tive words. In part, this reflects that recall-related news articles are usually not emotionally charged. A recall￾related article on average contains only 3.8% (4.4%) of negative (positive) words. This implies that home bias is expressed in a subtle way, which may work bet￾ter than an explicit discrimination because (1) readers may not buy into emotionally charged articles espe￾cially when they are aware of potential bias, and (2) newspapers can discriminate against foreign compa￾nies without leaving concrete evidence of bias, which might be of more concerns for central party newspa￾pers that receive more attention from foreign audience. On the whole, I find evidence of a home bias in offi￾cial newspapers, especially those controlled by the cen￾tral party, and limited evidence for bias among nonof￾ficial newspapers. An auto recall does not always make it into the newspaper headlines, yet whether the firm in question is domestic or foreign appears to have a considerable effect on whether the recall receives news coverage, especially by official newspapers. In addition to bias in the news selection stage, foreign firms are subject to additional forms of home bias as they re￾ceive lengthier and more negative coverage, albeit in a subtle way. The evidence presented here is consistent with the government-driven bias hypothesis. Although the finding does not completely rule out the influence of demand-side pressures, the additional degree of bias found in official newspapers compared to commercial newspapers suggests the presence of government influ￾ence in shaping the biased coverage. State-Owned Enterprises and Party-Controlled Papers The previous section demonstrated that regional official newspapers are less biased. However, some regional governments have a greater interest in the automobile industry than others because they own 963 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242