Publishers in makeover

A girl reads a copy of Moonwalk in Paradise: The Michael Jackson Biography inside Wangfujing Bookstore in downtown Beijing. Market-oriented reform is enabling the publishing industry to respond to market needs more quickly. Zhang Wei

Michael Jackson, the "king of pop," died on June 25. Just six days later, the 130,000-word book, Moonwalk in Paradise: The Michael Jackson Biography, was on bookshelves in China.

The "instant book" was published by China's Xiandai Publishing House and instantly became a best-seller.

"We have done a nice job in quickly responding to market needs," said Zang Yongqing, general editor of Beijing-based Xiandai.

In fact, Moonwalk in Paradise remains on best-seller lists.

Xiandai, a State-owned publisher, is abiding by the government's call for market-focused reform in the publishing industry to create a more competitive sector with a global reach.

The General Administration of Press and Publication, or GAPP, China's publishing industry regulatory body, released the "Guidelines on Further Reform of the Press and Publication System" in May.

The guidelines call on the country's mostly State-owned publishers to make the transition from government-supported enterprises to for-profit, market-based businesses.

The government is allowing private sector investments, which the government anticipates will be accompanied by marketing and market-minded management expertise.

A State-owned publishing unit now is allowed to sell as much as 49 percent of its holdings to domestic private investors.

The guidelines also allow foreign investments, but no detailed provisions accompanied those guidelines.

State-owned presses can also attract capital by being listed on securities exchanges or by joining other State-owned companies in bids to go public.

The government also is encouraging partnerships to combine well-run publishing businesses, apparently hoping that another result is the demise of poor-quality enterprises.

GAPP Minister Liu Binjie said six or seven publishing giants, each with assets and annual revenues exceeding 10 billion yuan, will be established to compete globally within the next three to five years.

"We introduced this reform to speed up the development of the press and publishing industry and to allow the culture of the Chinese nation to be recognized worldwide and disseminated around the globe," Liu said.

There are 579 State-owned publishing houses in China. By January, 260 had implemented market reforms or removed themselves from government support systems by setting up new financing and operations models.

Among the publishing houses taking the lead is Shanghai-listed Time Publishing & Media Co Ltd, a unit of the State-owned Anhui Publishing Group in Anhui province.

The State-owned Anhui Publishing Group, which specializes in the publication of technology-related books and periodicals, obtained a back door listing in January 2008.

The company obtained the listing by injecting 1.68 billion yuan of its publication and printing assets into a listed umbrella company, USTC Chuangxin. The abbreviation USTC was for University of Science and Technology of China.

Then the new company was renamed Time Publishing & Media Co Ltd.

Two children sit in front of a shelf at a bookstore in central China's Henan province. Many Chinese publishing houses are focusing more on profitable educational books since being urged to make the switch from government-supported to self-sustaining enterprises. Asianewsphoto

The new company, engaged in both publications and high-tech media, generated sales revenues of 1.47 billion yuan, with a net profit of 215 million yuan, in 2008, according to its annual report.

Those numbers translated to year-on-year growth of 21.6 percent and 12.5 percent, respectively. The company's per-share earnings reached 1.04 yuan.

Before the makeover, the company had forecast a profit of 5.55 million yuan and per- share earnings of 0.07 yuan for 2008.

Time Publishing & Media predicts continued growth in profits this year despite the economic downturn, and others agree with that assessment.

"Their new assets are rather robust, so the profit and earning surges are reasonable," said He Yan, research and development director at Quadrel Investment, an investments consulting firm.

He and other stock market analysts also attributed Time Publishing & Media's strong performance to a favorable tax policy implemented by the Anhui provincial government.

The province offers generous tax rebates and other incentives to promote the publication of educational materials.

"Restructuring and the market fundraising model has worked, demonstrating that reform was necessary and timely," said Wei Pengju, deputy director of the Creative Culture Research School at the Central University of Finance and Economics.

The new company also will help Anhui Publishing Group diversify its business by adding new media such as Internet, digital, audio and video sectors.

The move into new media prompted Xu Yaowen, an analyst with Galaxy Securities, to recently announce a "buy" recommendation for Time Publishing & Media shares.

Sources at GAPP reported that revenues industry-wide increased 20 percent year-on-year during the first half of 2009.

Book sales and new media sales increased 20 percent and 40 percent, respectively.

At the same time, investment in the publishing industry sector surged 36 percent.

"But its contribution to the nation's GDP is small, compared with other countries," Liu of GAPP said at a publications seminar in May.

Private involvement

Wei of the Central University of Finance and Economics told China Business Weekly that the publishing house reforms also were in response to the rapid development of a private publishing sector that had previously been regarded as illegal.

More than half of the books now on the market reportedly have been created by private publishers in backdoor deals with State-owned houses.

State-owned publishing houses are the only presses allocated publication serial codes by GAPP. A book must have a serial code with each title to be published legally.

Wei said the reforms force transparency and also provide a way for private publishers to become legitimate.

Founded by Zhang Xiaobo in 2003, privately owned Republic (Beijing) Book Co Ltd has been engaged in publishing, as well as associated consulting, translation, public relations, design and marketing work.

"We have been cooperating with various official Chinese presses to design titles and do a lot of the marketing and public relations work," Zhang said.

On April 25, Republic (Beijing) Book Co and State-owned Jiangsu People's Publishing House, a press operating under Jiangsu-based Phoenix Publishing & Media Group, each invested 100 million yuan to establish Beijing Phoenix Republic Culture and Media Co Ltd.

Zhang holds a 49 percent stake in the new company and is general manager.

According to Tan Yue, chairman of the Phoenix group, Zhang is responsible for title designs, working with authors and the marketing operations.

The State-owned side retains final authority on what will be published, Tan said.

"With the same amount of funds, the State-owned partners have the right to decision-making," said a privately owned publisher, who asked not to be named.

"Private partners are just like employees of the joint venture, and that's unfair," the source said.

Under the reform framework, State-owned players said the greatest challenge is human resources.

Yuan Bin, director of Dalian University of Technology Press, said the new operating model allows autonomy and flexibility in the administration of the presses. That means the human resources system has to be justified.

So far, more contractors are taking the place of full-time employees during the transition period, he said.

(China Daily 07/27/2009 page1)