Market Access Report: Media & Publishing

Regulatory Regime

Three major government divisions under the State Council are responsible for overseeing the media and publishing industries: the Ministry of Culture (MOC), the State Administration of Radio, Film and Television (SARFT) and the State Administration of Press and Publishing (SAPP). These three bureaucracies each plan, regulate and administer various aspects of the entire industry, which often results in overlapping jurisdictions. For example, the establishment of ventures in the media sector as well as the publishing and broadcasting of certain products or programmes may require approvals from all three departments, inevitably leading to confusion among both the bureaucrats and foreign investors.

Advertising

According to the newly revised Catalogue, foreign ownership of an advertising company cannot exceed 49% until December 11 2003; after this date foreign investors will be able to hold majority interests. By the end of 2005, all foreign shareholding restrictions will be lifted, which will finally open the door to the establishment of WFOEs in the advertising sector.

Audio-visual Services

Foreign companies are now permitted to establish CJVs with Chinese partners to engage in the distribution of audio-visual products, excluding motion pictures. As an illustration of good faith on the part of the Chinese government, the MOC and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) promulgated detailed measures on the management of audio-visual products distribution CJVs on December 10 2001, one day before China's accession to the WTO.

Foreign companies are now also permitted to own cinemas, with foreign investment not to exceed 49%. Subject to compliance with China's regulations on the administration of films, China will allow the importation of 20 motion pictures per year for release in theatres on a revenue-sharing basis; China's current quota is 10 foreign movies per year.

Nevertheless, a number of key audio-visual businesses remain closed to foreign investment. For example, the production, publishing and issuing of audio-visual products and electronic publications (including information in the form of CD-Rom, CD-I, FD, Photo CD, IC Card or DVD-Rom), previously categorized as restricted in the old Catalogue, are now listed as prohibited to foreign investors. In addition, foreign-operated news agencies, radio and television programme publishing and broadcasting companies, film production and publishing companies, as well as video screening companies, are still forbidden in the new Catalogue.

Publishing

From December 11 2002, foreign investors can participate in the retailing of books, newspapers and magazines, provided that they do not hold majority shares for retail operations that consist of more than 30 chain stores. By the end of 2004, foreign participation in the wholesaling of books, newspapers and magazines will be permitted as well. However, publishing and the importation of books, magazines and newspapers remain prohibited to foreign investment. Majority ownership of printing companies must be held by the Chinese partner to a joint venture, except for packaging and decoration printing companies, which have no requirements on majority ownership.

Conclusion

Despite these restrictions, the trend towards a long-term opening up of China's media and publishing industry is underway. This is not only reflected in the gradual changes in foreign investment policy, but in the increase in foreign investment that has resulted from them. The German publisher Bertelsmann and its Book Club campaign have been a great success in China's major cities, and the deal permitting Rupert Murdoch's Star TV channel, in cooperation with China's CCTV and Guangdong Cable TV Networks Company, to broadcast cable Chinese-language entertainment programming in Guangdong are good signs. As China's GDP continues to grow and the disposable income of its citizens grows apace, the demand for media, entertainment and other information will undoubtedly increase. Now, the question for foreign investors to consider is when, where and how they will be permitted to enter this market.

By Mitch Dudek
and Lucy Lan Xu

Jones, Day, Reavis & Pogue,
Shanghai