“BB’s registered capital is 20 million yuan ($2.42 million),” said Wang Jinyan, while the actual investment is more than this figure. BIG is very confident of the significance of BB, and the total expected investment will reach as much as 2 billion yuan ($241.55 million).

The power of private companies should not be underestimated. It is reported that the annual sales revenue of Chinese book publications has exceeded 70 billion yuan ($8.45 billion). Private companies and state-owned enterprises shared the market on a 50-50 basis. At present, there are dozens of privately-owned book distribution companies whose operation scale reached 1 billion yuan ($120.8 million) and whose network reaches as many as 70,000 to 80,000 outlets, five times more than the Xinhua Bookstore.

However, when the wholesale market is opened up to foreign capital, what will be the implications for private book merchants?

Huang Mingyu, General Manager of Xinhua Lipin Book Co., believes that the entry of foreign capital will positively affect the book distribution channel and make it smoother. After it entered Chinese market, Bertelsmann has kept on developing new distribution channels. Huang hopes that when foreign capital enters China, it may help to broaden distribution channels by bringing in new management systems, like building up franchise stores and establishing advanced logistics systems.

To be more conservative, Yan Bo, General Manager of Shanghai Jifeng Book Co., thinks that the opening up of the Chinese book market has not yet brought much pressure for private book companies. He noted that foreign capital is attracted to the quantity of the book business and has yet not started to do business. Meanwhile, chaos still exists in the present domestic book market, which needs attention through the introduction of foreign assets. Therefore, he said the first imperative for private book companies is to manage their businesses effectively.

Reforming State Publishers

Due to the heavy control and administration of the media sector, real market competition is lacking and the country’s publishers as a whole remain inefficient.

Xinhua Bookstore, which has a history of 68 years, is the biggest state-owned book distribution enterprise. As protected by policy, it has, historically, enjoyed some 70 percent of the market share.

Faced with the opening up of the book market, Xinhua is no longer entitled the special rights that it once enjoyed. In order to maintain its market share, the only way out is to reform.

For example, Sichuan Xinhua Publishing Group has completed the reform of all its branches in Sichuan Province in the past three years, excluding those in the three ethnic minority autonomous prefectures. After the reform, the bookstore has transformed into a company from a public institution. By April 20, 2004, all 5,678 workers of the 112 Xinhua bookstores in Sichuan had learned the important change of the bookstore and accepted it with pleasure.

The market-oriented management method and appropriate incentive mechanism have greatly stimulated the employees’ working enthusiasm. As part of the reform process the new Xinhua gradually withdrew from the old administrative style of management to adopt the management of property ownership. It switched its management focus from one of gain and loss to a more long-term strategic interest. Meanwhile, the new Xinhua carried out other reform measures including transfer from planning management to performance management, from part management to an integrated management, from emphasizing the nature of the company to the revenue of the company. Xinhua Bookstore has also devised a new control management system, which established the parent-subsidiary relationship among its stores. All these measures point to a bright future for the bookstore.