BEIJING, China: Comedian Li Haoshi's wisecrack about the nation's military in Beijing last weekend has marked the largest scandal yet for stand-up comedians in China.

China's comedy scene rose quickly during the COVID-19 pandemic, as people spent more time indoors watching viral streamed comedy shows. The most popular were produced by Xiaoguo Culture Media Co, the firm at the centre of the current uproar.

Audiences at comedy events in China are often asked not to record jokes or performances, in part because of an awareness that a short clip can be quickly taken out of context on Chinese social media.

Li, whose stage name was House, nevertheless went viral when an audience member posted a description of a joke he had made during a performance on May 13, suggesting it was demeaning to China's People's Liberation Army (PLA).

Beijing police said on their Weibo social media account that they were investigating Li.

Additionally, Beijing's Culture and Tourism Bureau slapped a 14.7 million yuan ($2.13 million) fine on Xiaoguo and barred the company from hosting performances in Beijing and Shanghai, saying it would "never allow any company or individual to use the Chinese capital as a stage to wantonly slander the glorious image of the PLA".

Meanwhile, Beijing-based independent political analyst Wu Qiang said, "Stand-up comedy has been the last bastion in which people ... can still enjoy entertaining commentary about public life. After this, the space for stand-up comedy and public expression in general will inevitably keep shrinking."

A Beijing-based comedian, speaking on condition of anonymity for fear of repercussions, said a number of their shows had been cancelled in the wake of the incident and that they feared for the future of the stand-up industry.

Other comedy companies, including Beijing's Danliren Culture Media, have cleared their performance schedules without explanation.

China's leadership "fed an atmosphere of paranoia and fear over national security risks, defined so expansively that anything can be an attack," said David Bandurski, director of the China Media Project, a U.S.-based research group.

"A punchline is treated with the same alarm as a real assault on the nation."