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 The October segment — the brainchild of a network executive who
noticed Starbucks coffee cost more in China than in Britain — was
mocked by Chinese Internet users and criticized by economic experts.
But the reaction inside China Central Television (CCTV), which has
targeted numerous foreign firms this year, was just as harsh, said a
person with direct knowledge of how the Starbucks report came
together, and a former employee who left weeks ago.
However, those misgivings were all expressed in private or on a
Chinese mobile phone chat application, illustrating how journalists
in China are still reluctant to challenge editors in a system
beholden to the ruling Communist Party.
"I couldn't find you a single person at CCTV who genuinely agreed
with that report. Everybody thought it was very silly," said the
person with direct knowledge of the segment. "Of course, during
meetings, the higher-ups all said it was right to do the report and
no one disagreed." The person didn't want to be named because of the
sensitivity of the matter.
CCTV did not respond to requests for comment.
"DIGGING FOR GOLD"
The network has taken many foreign firms to task this year over
pricing, poor quality and shoddy customer service. They include
Apple, Samsung Electronics, the KFC restaurants of Yum Brands Inc
and British drugmaker GlaxoSmithKline PLC.
Last week, CCTV accused foreign carmakers of charging local
customers more for repairs than in other markets, singling out Audi,
Subaru, and Jaguar Land Rover.
In some cases, the reports have won plaudits from viewers and forced
companies to change their practices. For example, Apple apologized
to Chinese consumers for poor communication over its warranty policy
and changed some of the terms.
The two sources said they were not aware of any government directive
to CCTV to target foreign firms. At the same time, CCTV editors were
praising reports focused on the rights of Chinese consumers, they
said. Chinese government bodies and state-owned firms are usually
too sensitive to investigate, putting foreign companies in the
firing line for hard-hitting corporate stories, experts said.
"Criticizing foreign companies is very safe," said Zhan Jiang, a
journalism professor at the Beijing Foreign Studies University.
"Leaders don't pay any attention to it, people will support it, and
it won't bring the network any trouble."
Indeed, notes summarizing an editorial meeting before the Starbucks
report aired shows how much foreign firms are in the cross-hairs.
"It's not just coffee. At the same time, it's lots of luxury goods,
like cars, international brands, they've all come to China to dig
for gold," said the notes, taken by an employee at the meeting and
obtained by Reuters. "For most of them, their prices in China are
the highest in the world."
INTERNAL MEMO SET THE TONE
CCTV is China's state broadcaster. Its Chinese-language news
channel, CCTV 13, functions as a primary vehicle for government
propaganda as well as a platform for legitimate reporting, including
on crime, social issues and business, experts say.
The 18-minute Starbucks report, which appeared to use hidden
cameras, showed CCTV reporters in Beijing, Chicago and Mumbai asking
people on the street what they thought about the price and value of
Starbucks coffee. It criticized the Seattle-based company for
charging higher prices than in others markets, which it said helped
Starbucks earn "fat" profit margins given its costs in China were
not very high.
In an emailed statement, Starbucks said it understood the concerns
raised in the CCTV report, but that its prices are based on local
market costs including infrastructure, labor, ingredients and rent,
which are different in each market.
A separate internal CCTV memo describing the thinking behind the
report, also obtained by Reuters, shows staff believed Starbucks was
taking advantage of a lax Chinese regulatory environment. "We need a
lawyer to explain what punishment Starbucks would receive in the
U.S. if it just hiked its prices as it pleased — this section should
be as complete as possible," said the memo.
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The broadcast report did not use any U.S. lawyers. In a market
economy like the United States, companies are free to charge
whatever they want for their products.
According to the memo, the CCTV reporters overseas were told to ask
passers-by outside Starbucks: "Is it reasonable to sell at such an
expensive price in a low-income country? In the U.S., does this
violate any principle?"
When the report aired, Internet users chided the network for
tackling a minor issue compared to China's many challenges.
Economists said CCTV had failed to grasp the concept of supply and
demand, noting it was normal for a company to charge different
prices for its products in different countries.
"Of course Starbucks has the right to charge premium prices — if
that's what consumers want, that's what they'll go to," said Mark
Tanner, managing director of China Skinny, a marketing, online and
research agency.
CCTV's expertise also came under scrutiny last month when it said
local property developers owed as much as 3.8 trillion yuan ($624
billion) in unpaid land taxes. The tax bureau, while not naming CCTV,
said the estimates were inaccurate and a misreading of tax policy.
CAUTIONARY TALE
The person with direct knowledge of the Starbucks report said many
journalists thought it was a bad idea to begin with. "There wasn't a
single person before the broadcast who was brave enough to stand up
and say this report is problematic and we can't do it like this,"
the person said.
After it was broadcast, journalists lambasted the report within the
corridors of CCTV's headquarters in Beijing or in groups on the
popular WeChat app run by Tencent, a Chinese Internet company, said
the two sources.
The story idea was put forward by the network executive, who both
sources declined to identify. The project was given to reporters in
the economics editorial team, they said. According to the internal
memo, it became part of the team's push to report on the "windfall
profits by foreign brands".
"U.S. enterprises hike prices as they please in China, but in the
U.S., Chinese enterprises don't dare to do the same," the memo said.
 f
After the widespread criticism of the report, it was raised quietly
as a cautionary tale in low-level editorial meetings, said the
former CCTV employee, who left the network for personal reasons and
who also declined to be identified.
She said a senior producer who did not work in the economics
department told reporters after the Starbucks report aired that they
should use discretion and judgment in choosing topics to avoid a
viewer backlash, including from social media.
Still, senior editors see foreign firms as key targets for
investigative reports.
"It was not a cohesive theme, but was suggested at general meetings — the idea that we have to be vigilant against these foreign
companies that are short-changing Chinese people," said the former
employee.
(Editing by Dean Yates)
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