China is lifting its ban on foreign investment in television and film production companies, as part of a package of landmark reforms intended to revitalize the country's sprawling state-dominated media industry.

The prospect of direct involvement in TV and film production will be of intense interest to overseas media groups, which are hungry for a greater role in the rapidly growing Chinese market.

The move also underlines Beijing's determination to commercialize media organizations ranging from newspapers to television stations - all of which have long been run as arms of the state and its ruling Communist party. Under the new policy, "strong and influential" foreign companies will be able to hold minority stakes in Chinese production companies, said Zhu Hong of the State Administration of Radio, Film and Television (SARFT).

"In the past we only allowed foreign and domestic companies to work together on films and television programs," said Mr Zhu, who added that the change of policy marked a "major liberalization".

"Now we have . . . issued clear permission for overseas and domestic companies jointly to create companies to make films and television programs," he said in an interview with the Financial Times.

Beijing is hoping a dramatic increase in private sector involvement in the television business will raise the quality and quantity of the content produced for the local market.

Local private companies will also be allowed jointly to develop pay channels, a reform that is intended to help attract the investment needed to fund China's ambitious plans for the expansion of pay television and digital TV services.

State control over television production was eased last year, when SARFT said that selected private companies would now be able to produce series for TV without being shadowed by a state-run corporation.

Overseas media companies can also expect to benefit from increasing demand for their content, with Mr Zhu saying restrictions on the amount of foreign films and television that could be broadcast would be raised.

However, foreign opportunities in actual broadcasting are likely to be limited. Currently Beijing permits 31 foreign channels to broadcast - only to hotels of three stars or above and to approve housing compounds.

A handful of channels run by overseas companies including News Corp and Viacom have been given "landing rights" in southern Guangdong province and are eager for access to audiences elsewhere in China.

However, Mr Zhu said SARFT was "not currently considering" any expansion of their reach.

Beijing is also loosening the grip of traditional state broadcasters on the television industry by allowing other government units and departments to offer pay-TV channels.

The latest reforms will allow organizations such as the weather bureau and health departments to set up their own channels for the first time.

(People's Daily February 9, 2004)