A dramatic change is brewing in China's audio and video sector, with six conglomerates emerging to take the initiative.

Zhang Xinjian, deputy director of the Market Department under the Ministry of Culture, said the blueprint to foster industrial giants is under discussion.

"Six big State-owned companies in this sector, such as China Record Corporation, China Audio & Video Corporation, Shanghai Audio-Visual Press and Guangzhou Pacific Audio and Video Company, will be chosen to be the core of the six conglomerates, which will incorporate publishing, issuing, wholesale and retail," he said.

Refusing to release further details, Zhang only said it is urgent for domestic companies in the sector to enhance their competitiveness by joining hands.

According to promises made by the Chinese Government for entry into the World Trade Organization, foreign capital will be allowed to retail audio and video products in the first year of its WTO entry, and wholesale in the third year.

Tuo Zuhai, head of the ministry's audio & video office, said the emerging six giants would be advised to invest more energy in publishing.

This sector will suffer a negative impact, although China did not promise to permit foreign players' involvement after entry into the WTO. Foreign dealers can directly introduce foreign products when they flood into the sales field.

"Meanwhile, publishing is the upper reaches of the audio and video industry," Tuo said. "Without a rich source, other sectors, including issuing, wholesale and retail, will lack the vitality for development."

Zhou Yong, a manager from Maya, a prominent audio and video products chain seller in Shanghai and its surrounding cities, felt a lack of new and good records in his store.

"With the rampant piracy, the publishers have little profits and lose interest in producing new ones," he said.

Statistics from the ministry show the national audio and video market can be valued at 30 billion yuan (US$3.62 billion), but legitimate products only totaled 5 billion yuan (US$603.8 million) - one-sixth.

Beginning this year, the ministry has formulated two key policies to crackdown on piracy.

Last month, the ministry announced it would close more than 200 markets selling audio and video products nationwide by the end of the year.

Audio and video towns, the popular name for markets selling audio and video products at retail and wholesale prices, have become major circulation points for pirated tapes, CDs and VCDs.

Since April, the ministry has launched a nationwide promotional campaign for audio-visual chain stores because the government has cast a larger, stronger circulation net to fight against piracy.

"It will also create a good environment for the emerging six conglomerates," Tuo said.

He added that the construction of six conglomerates will absorb many smaller counterparts and may not rule out the participation of private capitals.

Analysts said it is a good sign for private investment.

(chinadaily.com.cn 09/17/2001)