According to sources, new rules were being planned to regulate foreign investment in a move analysts said that would help to address the lack of clarity in the existing regulatory regime.

China does not allow foreign investments in its cable-television industry.

This announcement has come as a Hong Kong company is expanding its mainland cable-television joint ventures, in a move which underlines Beijing's willingness to allow foreign investment in the sector.

CVN Group, 33 percent held by Hong Kong-listed building contractor and multimedia network developer Prosper eVision, Monday received approval to set up its 10th cable television joint venture in the mainland, according to a source familiar with the agreement.

It is not clear how large a stake a foreign company will be allowed to own under the new rules.

It was said that the State Council was expected to approve the rules before the end of this year. They would be submitted for lawmakers' consideration next year.

CVN had been allowed to set up a joint venture with the Jiangxi Province Broadcasting and Television Bureau, in which it would hold a 49 percent stake, the source said.

The bureau would inject the province's entire cable network into the joint venture, in exchange for the CVN Group's injection of 1.5 billion yuan (about HK$1.42 billion) over six years, he added.

The deal is scheduled to be signed Tuesday.

Jiangxi will be the second province in which CVN has been allowed to own cable network assets.

About two years ago, CVN acquired a 49 percent control over the cable network of Baoding city, Hebei province.

CVN's 49 percent investments in joint ventures in the eight other provinces were limited to interactive cable television projects and did not include ownership of cable network assets.

Acquisition deals completed by the company have aroused analysts' concern over their legality, despite endorsements and participation by provincial authorities.

Analysts worry that the deals may not be approved by the central government, which has not announced official approval for foreign investment in the sensitive media industry.

The planned rules are expected to give a clearer legal framework. China is slowly opening up its tightly-controlled media industry.

Under a bilateral agreement between China and the United States in World Trade Organisation talks last November, foreigners will be allowed to invest up to 50 percent in Internet companies two years after China enters the WTO.

Investments in newspapers remain banned.

According to rules passed by the cabinet last September, content that is "subversive", threatening to the reunification of China or the stability of Communist Party rule and social security should be blocked from all portals.

Portal operators are also required to keep detailed records of Internet users who spread subversive content, for two months.

In addition to broadcasting content to Jiangsu's more than three million cable-television subscribers, CVN's joint venture can also invest in network upgrade projects to enable interactive television and e-commerce applications, the source said.

(China Daily 11/28/2000)