Shanghai Paradise Co Ltd, one of China's largest cinema chain owners, will hold the remaining 51 percent stake and the joint venture complex will be formally established on July 12, said the official surnamed Wang.

This is the first time AOL Time Warner has invested in a cinema on the Chinese mainland, indicating that the world's leading entertainment company is ready to tap the potentially vast local film market.

It was also hailed by experts as a signal of wider opening of the country's film market and expansion of the tiny foreign presence in the local film industry, as the nation has promised in its World Trade Organization commitments.

In the past, overseas investors from the United States, Singapore and the Hong Kong Special Administrative Region have already held minority stakes in other Shanghai-based cinemas.

A cinema shared by Eastman Kodak and Shanghai Film and TV Group Co is even located in close proximity to the Shanghai Paradise Cinema City in Xujiahui, Shanghai's busy commercial area.

Wang, in Paradise Co's general office, said the firm and AOL Time Warner inked the investment agreement a couple of months ago on the joint venture. The complex will have a registered capital of 28.5 million yuan (US$3.4 million).

AOL Time Warner yesterday refused to comment on the move, saying that a statement on this issue will be forthcoming within two weeks.

Wang said the co-operation actually started at the beginning of this year and AOL Time Warner has already invested some funds in the cinema complex. Located in the sixth floor of Xujiahui's Grand Gateway Shopping Mall, the Cinema City has a floor space of roughly 4,000 square metres and is equipped with nine screens and 1,400 seats. The complex is also a domestic pioneer in adopting digital projectors.

"Partnership with AOL Time Warner will enable us to renovate the cinema and make further investments in this field, which was impossible for us in the past," Wang said.

Moreover, the arrival of AOL Time Warner's managers will also introduce advanced management technology into Chinese cinemas.

"Both sides considered the other party as the first choice in co-operation," Wang said.

AOL Time Warner is the world's leading media and entertainment company, with holdings including interactive services, cable systems, filmed entertainment, television networks, music and publishing.

The Chinese partner Shanghai Paradise Co Ltd is the nation's first joint-stock firm in the culture industry. It was established in 1993 based on the restructuring of the Shanghai Film Distribution and Projection Co.

It is now a holding company specializing in theatre system integration which includes film distribution, the design and installation of cinemas, manufacturing cinema seats and other services such as advertising and tourism.

The company has stakes in more than 50 cinemas in Shanghai and neighboring areas.

Shanghai Paradise Cinema City has also produced some of the highest box office receipts in Shanghai.

Last year, sales revenue for the complex reached 30 million yuan (US$3.6 million).

Experts say AOL Time Warner's new investment also indicates increasing foreign interest in China's growing cinema market, which generates revenues of about 1 billion yuan (US$120 million) a year.

For the investors, Shanghai is a particularly important cinema market in China. While it only represents about 1 percent of China's population, it accounts for 12 percent of the country's total box office revenue. Historically, the Shanghai audience has also always been a trendsetter in China in the consumption of both domestic and imported films.

(China Daily June 27, 2003)