China on Wednesday slapped one of the country's best-known comedy companies with a 14.7 million yuan ($2.13 million) penalty, accusing it of "harming society" after a military joke made by one of its comedians drew strong public criticism.

The Beijing arm of China's Ministry of Culture and Tourism Bureau said it would fine Shanghai Xiaoguo Culture Media Co. 13.35 million yuan and confiscate 1.35 million yuan in "illegal gains" from the firm after finding that a recent show by Li Haoshi, who performs under the name House, had breached rules.

The incident has strongly divided the Chinese public over what sort of jokes are inappropriate as performances such as stand-up comedy become increasingly popular and also highlighted the limits of appropriate content in China, where authorities say it must promote core socialist values.