A former Welsh Guardsman, metals trader and would-be magazine publisher who fell foul of China’s stringent media controls may finally receive compensation for titles lost to a government publishing house.

The dispute dates back to the late 1990s when Mark Kitto, 40, joined a small English-language magazine in the southern city of Guangzhou. The success of that venture prompted him and his Chinese business partner to try their luck in the bigger, glitzier metropolis of Shanghai. He was taking a risk in a country where foreigners are not allowed to run publishing companies, but the titles – That’s Beijing, That’s Shanghai and That’s Guangzhou– all thrived.

The first, That’s Shanghai, made money from the third edition, with its mix of feature stories on life in China, listings and advertisements for restaurants, bars and clubs. By the time he lost the business in 2004, it was turning over about £2.5 million a year.

China insists on retaining responsibility for content and any foreigner wanting to enter publishing must obtain a permit – effectively requiring a partnership with a local venture. Mr Kitto found a partner in Yangzhou, near Shanghai.

As business expanded he came into contact with the more powerful and Beijing-based China Intercontinental Press, which works under the State Council Information Office to promote China to foreigners. It seemed a marriage made in heaven. But it was the start of Mr Kitto’s difficulties.

“They now made plain that I worked for them,” he said. “They said, ‘If we say it’s illegal, it’s illegal’.” The uneasy relationship fell apart when Intercontinental launched That’s China!,which Mr Kitto believed was cheapening his brand. When he began talks with a Hong Kong venture, his Chinese partners threw him out.

All he had left was the trademark. He lost that when the Trademark Adjudication Board scrapped his right to “That’s”. But he appealed. A Beijing court heard the appeal by Mr Kitto and his Yangzhou partner last November. On December 23, his lawyer was called to collect the deposit – normal practice when the plaintiff has won. But before he could reach the court, he learnt that the decision had been postponed.

“That was a bitter blow,” Mr Kitto said. “We had proved our case without doubt, I believe.”

Now the State Council Information Office has begun talks on a settlement, but Mr Kitto believes that its offer undervalues the trademark for a magazine that prints more than 44,000 copies a month in Beijing alone. The Government is offering five million yuan (£333,000). Mr Kitto and his Chinese partner have demanded ten million yuan – a sum that he believes still falls short of the value of the brand.

However, he is eager to move on with his life. With his Chinese wife and two small children, Mr Kitto now runs a café and bar in a hillside retreat south of Shanghai.

The decision to try for a resolution may have been initiated by the courts, he said. “I think this is the judge’s idea. They did not want to rule in my favour because that would be too embarrassing all round.”

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