The new rules will remove the current restriction whereby only state-owned enterprises can enter China's publications wholesale market, said Liu Bo, director of the administration's distribution department.

"Overseas capital and privately-owned businesses can both enter wholesale publications distribution in the form of joint ventures," he said. But state capital should hold a controlling stake in such joint ventures.

Liu said the rules are being revised in line with the promises China made when joining the World Trade Organization (WTO) in December 2001.

He said China will accept and handle applications from overseas investors to invest in the book, newspaper and magazine distribution sector once the rules go into effect. The regulations could be published as early as the first quarter of this year.

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

But China will not allow overseas investment in the editing sector, and a few of the 140 WTO members have pledged only limited access to overseas investors in their respective editing sectors, said Liu Bingjie, deputy director of the SPPA.

In keeping with its WTO commitments, China should open its entire book, newspaper and magazine wholesale and retail sector to overseas investment during its third year of WTO membership. It should also lift all restrictions limiting the number of overseas-funded distribution companies, geographical locations and share-holding rights.

Last year, China opened up the retail business in Beijing, Shanghai and Tianjin municipalities, Guangzhou in South China's Guangdong Province, Dalian in Northeast China's Liaoning Province, Qingdao in East China's Shandong Province and the country's five special economic zones -- Hainan, Shantou, Shenzhen, Xiamen and Zhuhai.

This year, all provincial capitals, together with Chongqing Municipality and Ningbo in East China's Zhejiang Province, will allow foreign capital into their retail markets.

Although state capital will no longer be the sole player in the publications distribution market, senior managers of state-owned distribution companies have expressed confidence they can face the challenges.

Competition for market share by non-state capital should encourage existing players to develop into stronger firms rather than going on the defensive, Ha Jiuru, president and general manager of the Shanghai Xinhua Distribution Group, one of the top distribution groups in the country, told China Daily.

(China Daily January 23, 2003)