The new rules, issued by the State Press and Publication Administration (SPPA), provide specific guidance on the establishment of foreign-funded book, newspaper and magazine distributors.

In accordance with its World Trade Organization commitments, China opened its book, newspaper and magazine retail business to foreign investors in December last year, although this is still limited to certain areas of the country.

An official from the SPPA distribution department said it will accept and handle applications from overseas investors to invest in the book, newspaper and magazine distribution sector once the rules go into effect.

More than 60 overseas companies have set up offices on the Chinese mainland with the intention of investing in the publications distribution sector. They are likely to be the first to have their applications approved.

The rules set out requirements on application procedures, registered capital, and business scale of these foreign-invested distributors.

A registered capital of 5 million yuan (US$604,000) is needed for retailing companies and 30 million yuan (US$3.62 million) is required for wholesale enterprises.

The regulations regarding wholesale companies will take effect on December 1, 2004, when the sector is opened to foreign investors, the official said.

"In those areas, policies have become clearer, increasing the investment certainty," said Zhao Xiaobing, president of Global China (Beijing) Media Consulting Co.

Distribution of newspapers and magazines will become the most profitable investment area in China's media industry, Zhao predicted.

Wang Gang, an official from Xinhua Bookstores Co, said the opening-up policy may bring challenges to the publications industry.

The distribution sector is important to the whole publications industry, he said, adding that if domestic distributors perform well in the next few years, the publication enterprises could compete with big multinationals. Otherwise, they will be unable to cope.

The sector has been monopolized by the government for decades through the nationwide distribution networks of China Post and Xinhua Bookstores.

In response, China is planning to develop a number of State-owned distribution groups, giant publications enterprises with chain operations and modern logistics services to improve its market competitiveness, Wang said.

(China Daily April 4, 2003)