Foreign enterprises will be able to operate and build cinemas as minority owners of joint ventures or co-operative enterprises starting on January 10, a change that will trigger tough competition for State-owned theatre companies.

The State Council's amendment of rules on movies and others on audiovisual products upholds the nation's promises when it joined the World Trade Organization earlier this month.

The move will create immense competition for the domestic cinema business, said Guan Zhibin, manager of the Capital Cinema, one of the top cinemas in Beijing.

State-owned cinemas must expand their theatres quickly and adopt new management techniques now, Guan said.

Foreign-funded cinemas will typically have as many as 16 screens to give audiences more choices and maximize profits, while theatres like Guan's are State-owned and usually have far fewer.

The Capital Cinema plans to build a new theatre with as many as 12 projection halls within a few years, but that will probably require foreign funding, too, he said.

Joint-stock cinemas in Hangzhou of Zhejiang Province and Shanghai have proved successful, Guan noted.

New regulations for the audiovisual industry will also kick in next month, dictating that a foreign enterprise must co-operate with a Chinese partner to distribute audiovisual products, said Zhang Jian'an, vice-director of the Market Division with the Ministry of Culture.

Foreign firms will be allowed to distribute programs sold in forms of tapes, videotapes, phonograph records, compact discs, and laser discs as long as the content is not banned, but they are not allowed to import programs.

"The introduction of foreign capital will bring harsher competition as well as fresh forces to the market," he said.

The current audiovisual product market is confronted with many problems, including the disorder, inefficiency and small scale of the wholesale and retail network. Pirating and smuggling are also major issues.

"This revised regulation will enable us to learn from foreign companies and use them to expand the sales volume of genuine audiovisual products," he said.

The new regulation will be coupled with efforts to consolidate State-owned enterprises to enhance domestic competitive abilities.

(China Daily December 28, 2001 )