The new company - the Huaxia Film Distribution Co - will be formed around June 19, according to Gu Guoqing, planning director of the Movie Management Bureau at the State Administration of Radio, Film and Television (SARFT).

The new distributor will shatter the decade-long monopoly of the China Film Group (CFG) over imported films.

Gu believes the competition will lead to more efforts to promote imported films and boost market size.

Last year, 50 foreign films were screened in China but promotional activities were rather weak.

"One major reason behind this is that the CFG is the sole distributor. It cannot pay enough attention to every film and try its best to promote all of them well," Gu said.

"With the competition created by Huaxia, foreign films will enjoy better promotion and achieve higher box office sales."

But Gu does not believe that the heavier promotion of imported films will eat into the market share of domestic titles.

Results of domestic films are important benchmarks when assessing the achievements of distributors and judging how many foreign films should be released.

So both distributing groups will push to promote domestic films, Gu says.

"And the result will be a bigger market," Gu said.

The bureau will ask each of the companies to distribute at least 20 domestic films annually with a box office of up to 80 million yuan (US$9.67 million).

The bureau is currently working out a set of detailed rules governing the allocation of imported films between the two groups.

Income generated from imported films accounted for more than half the national film market's annual revenue of 1 billion yuan (US$129 million) last year.

Liu Jianzhong, director of the bureau, will head the new company as chairman, but the general manager of the firm has still not been chosen despite a nationwide recruitment programme.

With a registered capital of 60 million yuan (US$7.24 million), Huaxia will be backed by 19 institutional investors.

The largest shareholder is China Broadcasting Networks (CBN), which will take a 20 per cent stake.

CBN was founded in late 2001 and is the nation's largest media conglomerate. Its members include China's largest media institutions, like China Central Television, China National Radio, CFG and China Radio International.

Huaxia's rival, CFG, will also take a 10 per cent stake by investing 6 million yuan (US$724,000).

Other stakeholders are leading Chinese film studios such as the Shanghai Film Studio and Changchun Film Studio. They each have 10 per cent.

The establishment of Huaxia is another milestone in the reform of the domestic film market following the establishment of 35 cinema circuits last year, Gu said.

Cinema circuits refers to Western-style cinema franchises comprising a number of cinemas under one name, which can operate in one or several regions of the country. The system was launched in the middle of last year.

Also, top policy makers were still working on the final version of a regulation to allow foreign and private investment to take a controlling stake in the film distribution sector, Gu said.

The move will mark another breakthrough in the opening of China's closely supervised film market, which has been reserved for State-owned companies in the past.

(China Daily June 13, 2003)