China's giant Xinhua Bookstore distribution firm is considering plans to introduce foreign investment while transforming itself to a joint-stock company.

Xinhua Bookstore Head Office, founded in 1951, used to be the sole distributor of books and audiovisual products to at least 5,000 bookstores across the country.

More than 500 publishing houses used to rely on it to distribute their publications.

However, the state-owned distribution company is now challenged in several ways.

"Xinhua Bookstore Head Office will be reshuffled into a joint-stock company soon in order to break the bottleneck of development," said Yang Muzhi, chairman of the board of Xinhua Publication Distribution Group Co.

Xinhua Bookstore Head Office is one of the group's three subsidiary companies.

Privately-owned bookstores, which have grown rapidly in recent years, are one of its competitors, said Liu Guohui, general manager of the Xinhua Bookstore Head Office.

Privately-owned bookstores now account for the sale of at least 40 percent of all non-academic books.

"Other competitors are foreign distribution companies," Liu said.

Foreign firms will be allowed to sell and distribute publications in all cities in China at the end of this year, in line with China's pledges made on accession to the World Trade Organization in late 2001.

All restrictions will be lifted at that time on the functioning of foreign-funded distribution companies.

It has therefore become an urgent task to reshuffle the company and strengthen its supply ability, said Yang Muzhi.

The head office is now negotiating with several investors.

According to Song Xiaohong, general manager of the group, domestic and foreign capital will both be considered when transforming the head office into a joint-stock company.

The group also plans to build a network of stores across the country.

The group will form distribution centers in six areas covering the whole country in five years, said Yang Muzhi.

It has a target of establishing at least 1,000 chain stores and 20 large bookstores covering an area of at least 3,000 square meters.

Its distribution network will serve more than 15,000 bookstores in five years' time.

"By then, the company should achieve annual sales of 3 billion (US$361 million)," said Yang.

(China Daily August 9, 2004)