On the first anniversary of the People's Republic of China in 1950, the China Acrobatic Troupe was founded as the country's first state-level art troupe.

Its first task, assigned by then- Premier Zhou Enlai, was to visit the former Soviet Union on a friendship mission.

Over five decades later, the iconic troupe set another landmark: With a crew of more than 700, it became the first among China's dozen large state-level art troupes to be partially privatized.

The decision, announced by its management on Monday, will change the troupe into a shareholding company with a private real estate company holding more than 40 percent of its shares, the state remaining the majority shareholder.

"By introducing a good, private shareholder, the acrobatic troupe will be run like a real business and hopefully enter the mainstream world market," said Li Enjie, the troupe's director.

China's cultural sector has always been carefully managed, but the downside is that thousands of state-owned art troupes are run as if still in the planned economy.

They didn't undergo restructuring as other state-owned enterprises did in the past decade, let alone being privatized, so Li's words reflect a change in the mindset of troupe managers.

With troupes floundering in the flourishing market economy, it's no surprise that managers are crying out for restructuring.

The central government has been calling for a reform of the cultural sector since 2001. In the past two years, it published a series of regulations to encourage private businesses to enter the sector.

The first came out in August 2005. Titled "Some Decisions of the State Council About the Entry of Private Businesses Into the Cultural Industry," it was given such importance that the People's Daily published the full text on its front page.

It stipulated that private businesses would be encouraged and supported if they entered art dealing, art education, art troupes, cinemas, entertainment, museums, and online games.

Private businesses are allowed to hold no more than 49 percent of the shares in some aspects such as the printing and distribution of publications, advertisements in, and the distribution of, newspapers and magazines, the production of radio and television programmes, and the production and distribution of movies. However, art troupes were left out.

The State Council issued a second regulation in January that promoted the restructuring of state-owned cultural enterprises while preventing the loss of state-owned assets.

With those two regulations publicized, the Ministry of Culture published an explanatory regulation this August saying that the restructuring of art troupes would be considered individually.

The reform put forward has been hailed as a forecast of "an effective cultural management system and an efficient cultural industry." For individual cultural organizations, it meant the way was cleared for private investment and the increased involvement of their managerial teams.

In the case of China Acrobatic Troupe, China Yin Tai Holdings Ltd, owner of the Beijing Yintai Centre in the heart of the capital's Central Business District, signed a contract to invest 50 million yuan (US$6.39 million), becoming the second-largest shareholder.

The majority shareholder will be the Beijing Cultural Development Centre under the Beijing municipal government's cultural bureau. Its shares have been converted from the troupe's state-owned assets and amount to about 59 million yuan (US$7.54 million).

Yin Tai Holdings decided to buy shares in the troupe because it has been earning money and still has a great market potential, troupe director Li said.

In the past six years, the troupe's revenue was halved, Li told China Daily. The government took about 15 million yuan (US$1.9 million) a year, and the troupe was allowed to keep the other 15 million.

"The China Acrobatic Troupe has been the most profitable among the country's thousands of acrobatic troupes, whether state or privately owned," Li said.

It earned the money through overseas tours and performing for foreign tourists every day at a rented theatre in Beijing. And therein lies an irony.

"Almost all our audience are foreigners, whether the shows are at home or abroad," Li said. "It is a sad fact that not many Chinese come to watch us."

Li's troupe can have a dozen groups of actors and actresses performing at different places abroad at the same time.

But because Chinese acrobatic troupes compete so fiercely for favour among international agents, they end up settling for payments as low as US$5,000, less than 1 percent of what Madonna makes for one performance.

"We are taking only a very small share of the revenue of each show," Li told China Daily. "It is kind of unfair. Maybe we can get more after we undergo the reform and become more international."

In the past, the management of the troupe had to go through complicated procedures before it got governmental approval for almost all its major actions, he explained. With private investors at hand, it now plans to fund the creation of about 10 new programs and build a theatre in a major park in Beijing.

(China Daily December 21, 2006)