Recent Print Sector Reforms Analysed
BEIJING --- China's print sector is currently in the midst of an industry-wide restructure and reform movement that is changing the way newspapers, magazines and publishers are doing business in the world's largest print market.
Following the accession of Hu Jintao to the top party position, the central government has unveiled a number of initiatives aimed at reforming and revitalizing the country's media sector.
In March, central government directives were unveiled that pulled back central government financial support for all but two publications, the People's Daily and Seeking Truth, a weekly magazine.
It had long been a staple of the state owned print industry that mandatory subscriptions by government bodies for a wide range of party produced and affiliated newspapers assured their financial success and well being.
That rug has now been pulled out from underneath them.
According to the regulations released in August, each of China's provinces and provincial level municipalities can use government funds to publish one newspaper and one magazine only. Any other publications will be allowed to continue only if they can prove that they can make it on their own.
The silver lining in this cloud for those publications is that while closing one door, central authorities may be poised to open another.
As the reform plan moves forward, there are many elements within the party structure calling for the liberalization of investment rules allowing for private capital to flow into many of these dying publications.
According to a number of internally circulated documents, authorities are considering a proposal that would allow outside investors to take an up to 40 percent stake in publications. This would allow for the state to pass the burden of financing these publications while at the same time ensuring that majority control remained in public hands.
Final confirmation of this policy is expected by the end of this year.
At the same time, the traditional publishing industry bottlenecks of retail and distribution are also being opened for foreign participation.
While restructuring to allow raising of capital on the markets is driving internal developments, a number of new regulations are set to improve the long-term efficiencies of the publishing industry as well as investment prospects for foreign companies.
When China joined the WTO in December 2001, China promised to eventually allow foreign companies to establish minority stakes in ventures for the distribution and retail sale of books, newspapers and magazines. While editorial control remains strictly off limits for foreign investors, the new regulations took effect on May 1, 2003.
The "Measures for the Administration of Foreign-Invested Enterprises Engaging in the Distribution of Books, Newspapers and Periodicals" states that China will expand external cultural exchanges and cooperation and strengthen the administration of foreign-invested enterprises engaging in the distribution of books, newspapers and periodicals.
Throughout the regulations, the term "books, newspapers and periodicals" refers to books, newspapers and periodicals published by publishing entities approved by the State Council's administrative department for publishing, while the term "distribution business" refers only to the wholesale and retail of books, newspapers and periodicals.
The measures state that the establishment of foreign-invested enterprises in this sector can be by the purchase of shares in, or the merger with, or acquisition of, domestic enterprises engaged in the distribution of books, newspapers or periodicals.
By May 2003, seven foreign companies had filed applications with the General Administration of Press and Publication (GAPP) to sell publications and books in China including companies from Germany, the UK, the US, Japan and Singapore.
Despite the implied restrictions, foreign companies have flooded onto the market, cooperating with Chinese partners through copyright transfer and consulting agreements. Often, this provides effective foreign control over content, layout, design, advertising sales and distribution functions.
Recent developments in distribution could be what the publication industry needs to overcome its structural problems; giving foreign investors legal entry into that sector while editorial control remains with the Party.