Bold media reform approaching
By Jia Hepeng (China Business Weekly)
Updated: 2004-07-12 15:02

China is set to unveil a massive media reform early next year, which is expected to put most of the country's newspapers, magazines and publishing houses on to a real market.

"Unlike the previous reforms for trial, this time the reform will fundamentally reshuffle China's media sector," said Zhao Xiaobing, president of Global China (Beijing) Media Consulting Co.

He made the remarks at a seminar to discuss investment opportunities arising from the reforms in Beijing last week.

Two women choose newspapers at a street stall. China's upcoming media reform is expected to bring more outside investment and competition. But experts caution that the current policies concerning the media reform still seen unclear. [China Business Weekly]

Zhao quoted Liu Binjie, deputy director of the General Administration of Press and Publication (GAPP), as saying that the 35 media units on trial will end their experiment of corporate-oriented reform in October and new policies will be made from data from these trials.

Liu made his speech at a national book fair held this May in Guilin, South China's Guangxi Zhuang Autonomous Region.

In the seminar, Zhao also released his new book "China Media Investment: Theories and Practice."

He said it is a guidebook to help investors grasp the chances of a gold rush in China's media reforms.

"Investing in reformed media! There can never be any other areas in China having such high returns and little competition," Zhao said.

Media corporations

According to Liu's speech, apart from newspapers run by the Party, the core of the media reform is that most press and publication units in China will be transformed from the current non-profit organizations (shiye) to profit-driven enterprises (qiye).

The policy orientation means media, as companies competing in the market, can absorb capital from other industries. They can also launch mergers and acquisitions, Zhao said.

Yet the policy does not seem new.

Many successful media have been operating for profits for a long time.

In 2003, the advertising revenue of Guangzhou Daily surpassed 2 billion yuan (US$241.55 million). Early in 2001, the central policy allowed State-owned capital to invest in media business departments -- advertising, circulation and printing -- after these departments were separated from editorial. In 2001, Beida Jade Bird Group, an investment firm affiliated to Peking University began to invest in a popular newspaper Beijing Times.

But this time, there is something different.

Previously, external investments were introduced for trial and their returns could not be ensured due to the lack of legal stipulation. With the upcoming new policies, outside investors can become shareholders of the media units, Zhao told China Business Weekly.

For those outside investors, the media sector is a gold mine because there is little competition between China's media and many areas of great promise are waiting to be further explored. For example, although there are some popular local urban newspapers, China still lacks truly nationwide newspaper groups, Zhao said.

In 2003, China has a total of 2,119 newspapers and 9,074 magazines. According to the research of Global China (Beijing) Media Consulting, total media revenues in China last year were 217.1 billion yuan (US$26.22 billion), including media advertising, newspaper and magazine circulation, book sales, short message sales, and sales of charged Internet portals.

Media advertising revenues last year surpassed 107.9 billion yuan (US$13.03 billion), rising 19.44 per cent year-on-year.

Liu Jianming, a professor of journalism with Tsinghua University, said that if China's media units become true enterprises, the contents will be greatly improved and the quality will have to be stable, as there will be pressure of bankruptcy.

Currently no media will go bankrupt in China even if their contents are poor, because they are defined as non-profit organizations.

So far, it is still unclear whether outside investors can become controlling shareholders of future media companies.

GAPP's Liu said that foreign and private publishers cannot publish newspapers, magazines and books in China independently, but it seems that they can become minor shareholders of media corporations.

In fact, several major investments in the media sector have been ratified earlier this year, including Beida Jade Bird's investment in China Youth Daily and Hong Kong-based Tom.com's investment in Computer Daily.

Both are highly symbolic. The investment in China Youth Daily is the first outside investment in a central-level newspaper and Tom.com's investment is China's second foreign investment in newspapers. Before Tom.com, the first Sino-foreign media joint venture (JV) was between China IT World and the US-based International Data Group (IDG).

"But the latter was ratified in 1980s when China did not know how to operate computer newspapers. The investment of IDG was more considered as an information technology investment than a media investment. But now, Tom.com's investment may imply the coming of a new era in which foreign media groups can play in China," Zhao said.

Publishing reform

Compared with the unclear reform policies in newspapers and magazines, the reform in the publishing sector is much more clear cut.

"With the exception of the People's Press and its provincial outlets, other publishing houses will all be changed into enterprises, operated and supervised in accordance with market and corporate rules. The People's Press will be responsible for the non-profit publications, such as academic, politics, and ethnic minority language and culture books," GAPP's Liu said at Guilin book fair.

Unlike the booming newspaper and magazine sectors, stories of book publishing are not so successful.

In 2003, the 570 publishing houses nationwide published 190,391 books, including 110,812 new books, with a total sales volume of 46.16 billion yuan (US$5.57 billion), rising 6.14 per cent year-on-year.

Although legally all publishing houses are State-owned organizations and private publishers are not allowed, it has long become widespread practice that State-owned publishing houses sell their book registration numbers to private book publishers for prices ranging between 10,000 yuan (US$1,208) and 50,000 yuan (US$6,039), depending on the fame of the State publishers, the book contents and the prediction of the book's sale volumes.

Private publishers will publish the book under the name of State-owned publishing houses but circulate the book themselves.

"The current practice is risky for both. State publishing houses may suddenly take back the book registration number they have sold to private publishers. On the other hand, State publishing houses also face the risk that private publishers may publish banned books or pornographic ones," said Wang Li, a Beijing-based private publisher.

"If private publishers like us can be allowed to become shareholders of publishing houses, the book publishing will become more predictable and stable," Wang said.

But she said that it is unlikely that private capital would enter the State publishing houses in a big way, because there were many obstacles, such as the heavy financial burdens and the lack of related legal stipulation.

Wang predicted that after the new policy to transform State publishing houses to enterprises is finalized, one State publisher may co-operate with several private publishers and they will gradually negotiate ownership co-operation.

Obstacles remain

Despite the strong signal of bold media reform, there are still many uncertainties.

Liu Jianming said that recent speeches by GAPP leaders and the Party's publicity department leaders are somewhat inconsistent.

"The publicity officials are more cautious, stressing stability, and this indicates the policy-makers have not finalized the reform plan," Liu Jianming said.

It is understandable. As an industry watchdog, GAPP wants the market to become more regularized while as ideological watchdog, publicity officials are more cautious, Liu said.

Another problem is how to define the editorial members of market-oriented newspapers and magazines. If they simply become employees of media companies, they may be more dominated by capital ownership instead of State policies. But if they are defined as State cadres, media companies will be difficult to rule.

Zhao said there is no ready solution to the problem. The problem of defining media editors and reporters can only be gradually solved in practice.

Besides the media reform's possible political risk, another major problem is that without sound legal regulation, market-oriented reform may lessen media professionalism and lower standards, Liu Jianming said.

So far, China has neither journalism law nor publishing law. The related regulations are scarce and unsystematic.

There cannot be a true media market without true legal governance, Liu Jianming said.

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