Ren Huiying, Board Chairman of Liaoning Publishing Group (LPG), kept busy during the whole of October, though autumn and winter are slack seasons for the sale of printed books. He shuttled between Beijing, Shenzhen, and Shenyang, capital of Liaoning, preparing to list his publishing company.

According to China Securities Journal, the China Securities Regulatory Commission (CSRC) has approved the Group's initial public offering plan, which willl make the company one of China's first publishing groups to list on the domestic stock market.

In a draft prospectus posted on the CSRC's website, the company, based in Shenyang, said it will offer up to 140 million A-shares on the domestic market. It did not say whether it would list in Shanghai or Shenzhen.

Media offerings

China will now fully opened the way for local media such as newspapers, publishing groups and official news websites to go public, according to the Britain-based Financial Times.

The government has approved listings by a range of publishers and newspapers to further reform the industry, Liu Binjie, the Head of the General Administration of Press and Publication (GAPP), was quoted by the neswpaper as saying.

The decision to commercialize the news media and publishing sector caused more than a few ripples in China's calm culture industry. The government now allows publishers to list all their operations, instead of just their partial operations, according to Liu.

"It is good news," said Tan Xiaoyu, an analyst at Guotai Junan Securities. In the long run, the publishing sector is expected to make a breakthrough in China's market-oriented reform, and from a short-term perspective, stock investors may have additional choices, he added.

Far from being a spur-of-the-moment decision, Liu's announcement is an advance briefing after careful deliberation by the authorities.

At the 17th CPC National Congress held in October 2007, General Secretary Hu Jintao put forward the idea of promoting vigorous development and prosperity of socialist culture in China, a strong signal that the government was about to further open its news media and publishing capital market. The sensitive news media is aware of the wide-reaching implications of the new policy, in comparison with regulations stipulated in the past.

According to the influential Caijing, researchers at the Publicity Department of the Central Committee of the Communist Party of China (CPC) and the GAPP conducted a great deal of research and held several symposiums for several weeks, to draft a plan to accelerate cultural restructure reform. Some specific measures for the reform are to be issued within a short period of time, according to one of the group's researchers, who declined to be named.

Although the entire media and publishing list is on a trial period, "it is certain to open the market broader and intensify reform," said an official from the Publicity Department of the CPC Central Committee.

In the past, the Chinese Government did not allow the entire operations to be listed in the market, and sought to separate publishers' commercial and editorial operations when they went public.

Currently, the news media listed in the Shanghai, Shenzhen and Hong Kong stock markets are Borui Media (Shanghai, 600880), Saidi Media (Shenzhen, 000504), Beijing Media (HK, 1000), Xinhua Winshare (HK, 0811), and Xinhua Media (Shanghai, 600825). All of these have just listed their commercial operations, but excluding editorial operations.

As a result, most of these stocks displayed weak growth due to the fact that industry's operations are being separated. In addition, risk is created because of connected transactions and competition between homogeneous businesses.

Liu noted that publishing books, instead of services like distribution and printing, is the most competitive aspect of media. This is the reason the government has allowed publishers to list their entire operations. He said the list media should obey the common rule of stock markets.

Liu said the government would gradually expand entire media operations by merging homogeneous businesses, so as to raise businesses' credibility among shareholders and to solve development problem in this sector.

Taking the lead

Although it is not the largest publishing firm and decided only recently to list in the stock market, LPG took the initiative in turning its public institutions into companies.

In the year 2000, the Group separated government function from both enterprises and institutions management, and is no longer subordinate to the Press and Publishing Bureau of Liaoning Province. Ren Huiying, head of the Liaoning Provincial Publishing Bureau at the time, gave up his position to become the board chairman of LPG, which was a remarkable event that year. The Group was appointed by the Central Government as a trial business in cultural structural reform in June 2003.

Currently, the organization embraces 23 institutions and enterprises, including 11 publishing houses, two chain bookstores and two large printing plants. It publishes over 4,000 varieties of books and audio-visual materials every year.

It was revealed by Liu Binjie that the Group "considered separating commercial and editorial operations, but now list the entire operations of the company, which embraces seven publishers."

In its A-share IPO plan, according to China Securities Journal, LPG will list its best businesses -- covering several publishing houses dealing in education materials and arts and pictorials -- as well as its commercial operations such as printing, distribution and retail sales. However, some of its publishing houses will postpone going public, said Chen Jingda, Vice Chairman of Ping An Securities, a company in charge of undertaking the IPO of the listed Liaoning Publishing Group.

The move to list the publishing company drew the attention of the central government.

The Group is considering an increase in its issue of stocks and the start of a merging plan, in spite of that the IPO hasn't started, according to the secretary of the board of the company. Soaring local stock prices had prompted LPG to issue its shares domestically, rather than in Hong Kong as originally planned.

Enthusiasms from media businesses

The case of Liaoning Publishing Group is hardly unique. Spurred by the bullish stock market, many other news media and publishing groups are enthusiastic to go public.

Currently, the number of news media and publishing businesses queuing up to submit applications to go public stand at least 13, including local publishing groups in Hunan, Guangdong and Jiangxi provinces, as well as Computer Weekly, a newspaper specializing in computers, based in Chongqing.

To speed up market-oriented reform of the publishing sector, the government is to support six media businesses to list in the stock market, said Wang Tao, Director of the Policies and Regulations Department of the GAPP, in January this year at a forum on the cultural industry.

Established in 1992, Computer Weekly is now home to more than 20 newspapers and magazines, including Digital World, E-Car (e-magazine) and a website, www.yesky.com. In 2002, the publisher joined hands with Hong Kong TOM Group to set up a company, with the latter's investment exceeding 200 million yuan ($28.8 million), accounting for 49 percent of the stake in the company.

Liu Binjie revealed that the government supported the full listing of Computer Weekly, but the paper itself has yet no exact timetable to go public, due to some specific problems of equity structure and benefit distribution for shareholders.

Yue Media (Shenzhen, 002181), controlled by Guangzhou Dayang Culture and Communication Co. Ltd, a subsidiary of Guangzhou Daily Group, issued 70 million shares on the main board of the Shenzhen Stock Exchange on November 16. The share price soared 207 percent to close at 23 Yuan on its debut.

However, Hunan Publishing Group was not as successful as Guangzhou Daily Group. It tried to go public early in 2001, but failed.

People's Daily Online, or PDO, affiliated to People's Daily, the organ paper of the CPC Central Committee, has now turned into an independent enterprise, with two separate businesses. One is an editorial network center, and the other engages in commercial businesses.

PDO President He Jiazheng stated that PDO was equipped with convenient facilities to go public compared with other official websites, thanks to its reformed independent enterprise and support from People's Daily and the Information Office of the State Council. Both of them supported PDO as a trial business to go public. He emphasized that the enterprise, however, had difficulty going public at present.

Xinhua.net, a similar news website, has no intention of listing on the market, since it is only responsible for editing work, and therefore not equipped with favorable conditions to go public, according to Zhou Xisheng, President of Xinhuanet.

Hurdles within the system

This move to list China's news media and publishing groups shows that the authorities are exploring ways to restructure culture, with Chinese characteristics involved.

China began to reform its publishing industry in 2000. The GAPP announced in 2004 that about 570 state-owned publishing houses were to be restructured and transformed into companies within the next three to seven years. This excluded the People's Publishing House in Beijing, and all the provincial people's publishing houses. So far, over 100 publishing houses have been successfully restructured and transformed into companies, and 23 publishing groups established, including Beijing Publishing Group, Shanghai Century Publishing Group, and Liaoning Publishing Group.

In April 2005, the State Council issued a circular to open the culture industry to non-public investors in terms of printing, distribution and media advertisement business, but on condition that the state-owned stake would exceed 51 percent.

In January 2006, the CPC Central Committee and State Council jointly issued suggestions to improve cultural reforms. In September, the State Council issued the Guidelines of China's Eleventh Five-Year (2006-10) Plan for Cultural Development, propagating accelerated restructuring and transformation for state-owned culture enterprises, and the setting up of a batch of listed cultural companies with striking main businesses and core competitive power.

However, the reform and restructure of the country's media industry is not a smooth process. Firstly, the management of China's media system is complicated. Printed media, including printed books, newspapers and magazines, has been mainly under the leadership of the GAPP. The State Administration for Radio, Film and Television (SARFT) is in charge of broadcasting, and film and television. The new media such as Internet and mobile phone industry is subordinate to the Ministry of Culture, GAPP and the Information Office of the State Council.

This multi-polar and multi-level management intensifies difficulties for the government, as it attempts to coordinate reform. Hence, to fully list on the market is not only a great challenge for media businesses, but also a test for the authorities in making management policies.

Secondly, promoting corporate-oriented reform in the media industry, and establishing new multimedia groups that transcend regional barriers, is no easy task. A government official noted that although the central government encourages large state-owned cultural businesses and enterprise groups to merge or reorganize crossing trades and regions, the reality is that cultural resources are cut into sections, resulting in small-scale businesses.

Take the Shanghai Century Publishing Group as an example. The Group was transferred from a public institution into a company in 2005, and was going to go public when the time came. It had millions of yuan in liquid funds, but the managers declined to invest the money into fields they were not familiar with. Finally they invested in the stock market.

If a media group has small-scale businesses, its capital liquidity will be weak, according to analyst Tan Xiaoyu of Guotai Junan Securities. The problem is that there are many organizations like the Shanghai Century Publishing Group

Game rules

An official from the Publicity Department of CPC Central Committee revealed that the aim of the government in allowing the media industry to go fully public was to promote the vigorous development and prosperity of socialist culture through the capital market.

Tan Xiaoyu of Guotai Junan Securities pointed out that the only way to avoid bureaucratic interference in the normal market, was to set up a trade legislation and a clear set of rules. To this end, the government has planned to establish a series of laws, including laws on the promotion of the culture industry, in its five-year plan, which ends in 2010.

(Source: Caijing, CCTV)