China Opens Tv Market to Foreigners

China will further relax its tight control of the media sector next week by introducing rules allowing foreign broadcasters to invest in television production companies.

The guidelines, which follow a loosening of controls on the publishing and film industries, have been welcomed by Rupert Murdoch's News Corporation, which is at the head of a pack of foreign businesses seeking to expand in a potential market of 1.3 billion people.

But, in a reflection of the political sensitivities that have long delayed reform of the media sector, the regulations limit the scope of foreign share ownership, content provision and brand marketing.

The partial opening is aimed at strengthening the domestic media industry through the introduction of foreign expertise and finance, without relinquishing overall control.

Under the rules, overseas companies can buy a stake of up to 49% in production ventures, which must have initial capital of at least $2m (£1.1m), or $1m in the case of animation companies. The local firms must already hold a production licence.

To ensure that the overseas partners bring skills and technology - as well as money - into the Chinese broadcasting industry, the regulations stipulate that only "specialised radio or TV ventures" will be considered for deals.

Officials at the State Administration of Radio, Film and Television said the change would foster competition and better equip broadcasters to survive in the global market.

International companies have long been keen to establish a base in China, but the media industry has remained largely closed compared with sectors such as telecommunications or cars. Most have not got much further than the satellite TV market, where Star - a Murdoch channel - BBC World, CNN and others vie for business that is supposed to be limited to embassies and selected hotels and housing compounds.

But the rules are often breached and dishes can sometimes be seen on the walls of people's homes. Along with increased sales of overseas documentaries, sports programmes and films, media analysts estimate that 2-3% of the content watched by Chinese viewers is foreign-made.

The rules will not allow overseas firms to buy shares in state-controlled channels or news providers, but foreign executives and industry analysts said they would create new opportunities to invest in small, nimble production firms that can sell content and help them to build a local business.

"For foreign companies, the sale of programmes will surely generate huge profits," said Liu Jianming, a journalism professor at Beijing's Qinghua university. "It will also enable them to create an audience and expand their influence in the longer term.

"The short-term impact will be small, but this is a trial period. If the foreign firms respect China's ideology and play a positive role in development and stability, they may later be able to enter more deeply in the cultural market. Next year will be a test. There could be greater openings in 2006 and 2007."

Chinese media consultants predict a steady expansion and opening of the market, which has already undergone some small but significant changes this year.

In the newspaper industry, the Beijing Youth Daily has announced that it will be the first daily to seek foreign investment with a partial flotation on the Hong Kong stock market. Wholesale book publishing is poised to open up to foreign competition by the start of next year under China's commitments to the World Trade Organisation.

In magazines, Tom.com, a Hong Kong media firm, has taken a slice of China's most popular computer weekly, and several foreign lifestyle magazines are selling content and establishing titles. In advertising, Star TV has opened its own Shanghai company. And in films, Warner Brothers has invested in cinemas in Shanghai and Guangzhou.

Zhao Xiaobing, head of Global China Media Consulting, which helps foreign firms to enter the Chinese market, predicted increasing opportunities for his clients as the media sector expands over the next decade. "This is partly because of the growing economy, which will push up advertising revenues, but also because of an easing of restrictions."