Industry Environment of China's Book Publishing Industry
Chapter 1
Industry Environment of China's Book Publishing Industry
Industry environment is an important external condition for the existence and development of an industry. The evolution of China's book publishing industry is not only propelled by its internal reform and innovation, but is also affected by the development of the international culture industry and such domestic factors as social, legislative, economic, and cultural environment, as well as publishing technologies. For this reason, this report will first make an analysis of the external environment of China's book publishing industry and its impact on the industry.
INTERNATIONAL INDUSTRY ENVIRONMENT
The world economy has grown steadily in recent years. Developing countries, like China and India, maintain strong economic growth, while some developed countries are on the track of economic recovery. Economic globalization has been an inevitable trend and countries are becoming more closely linked economically, politically, and culturally. Under such circumstances, the world's culture industry is experiencing a new round of development.
In terms of contribution to the national economy, the culture industry has become a pillar industry in many countries. In 2000, the Japanese culture industry had a market scale of 85 trillion yen, accounting for 17% of GDP.1 In 2001, the USA's culture industry, including film, TV, broadcasting, book, magazine, newspaper, and music sectors, created a value added of US$535.1 billion, accounting for 5.24% of GDP. The annual growth rate was 7%, much higher than that of other industries. The total output value of the publishing industry that year was estimated at US$791.2 billion, accounting for 7.75% of GDP.
In 2003 and 2004, the culture industry in major countries around the world experienced both adjustment and development. While the culture industry of many countries enjoyed a high-percentage growth compared to the same period in the previous year, it experienced a slowdown in others. Take the book publishing industry as an example. In 2003, the United States published 175,000 titles, a growth of 19% over 2002, setting a record with sales revenue of US$23.4 billion, an increase of 4.6%. In 2004, the book publishing industry of the United States hit a new record with 195,000 titles, an increase of 11.43% over 2003, and sales revenue of US$23.7 billion, a growth of 1.3%. In 2003, Russia published 81,000 titles, an increase of 16.1% over 2002 with 450 million copies sold out and retail revenue reaching US$1.5 billion. In 2003, Australia's sales revenue was about AUS$1.3694 billion, up 6.25% over 2002. By the end of 2003, the publishing market scale of the Republic of Korea was around US$5.564 billion. However, in the same period, the book publishing industry of some countries, such as Germany and Japan, was growing slowly due to sluggish national economies.2
At the end of 2001, China became a member of the WTO, an event that has provided a new development space for its book publishing industry. However, this also introduced more overseas competition for the local industry. China's WTO entry enables Chinese publishers to learn from their foreign counterparts in operation and management, attract foreign capital, technologies, and human resources, and take advantage of the WTO's preferential terms for developing countries to participate in international competition. At the same time, the pressure of international competition has enabled China to further break away from old mechanisms (such as local protectionism in the book publishing industry) that are incompatible with a market economy, thereby optimizing the industry structure.
POLITICAL ENVIRONMENT
The 16th National Congress of the CPC pointed out that in the first decade of the 21st century concerted efforts need to be made to build an all-round well-off society with higher standards that will benefit well over one billion people; further develop the economy, improve democracy, advance science and education, enrich culture, foster social harmony, and upgrade the texture of life for the people. Relevant state organizations publicized the Indices for Building a Well-off Society in an All-round Way, in which the Proportion of Values Added of Culture, Education, Sports, and Health Care was listed as an important index. This has paved the way for the further development of China's culture industry.
In 2003, the CPC Central Committee proposed a scientific outlook on development, making economic and social development people-oriented, comprehensive, coordinated, and sustainable. It is an important strategic concept put forward by the CPC after
considering the overall situation of China in the new period of the new century under the guidance of the Deng Xiaoping Theory and the important concept of Three Represents.3 The nature and core of the scientific outlook on development is to put people first, satisfy their increasing actual material and spiritual needs, and safeguard their cultural as well as economic rights so that everybody can enjoy the benefits of economic development.
To respond to the call made at the 16th National Congress of the CPC for developing cultural undertakings and industry, the CPC Central Committee convened a work conference on experimental cultural restructuring in June 2003. In October 2003, the Third Plenary Session of the 16th CPC National Congress passed the Decision of the CPC Central Committee on Problems Concerning the Improvement of the Socialist Market Economy System, which specifies the requirements for developing the culture industry and pushing further cultural restructuring. In December 2003, President Hu Jintao pointed out at a national meeting on publicity and ideological work that great importance should be attached to cultural restructuring and promotion in keeping with the development of a socialist spiritual civilization, and in response to the needs of the growing socialist market economy.
Since the 16th National Congress of the CPC, press and publication administrative departments have formulated many important policies and regulations regarding the reform and development of the press and publishing industry, covering the book, newspaper, periodical, electronic audio-visual products, and Internet sectors. These efforts have lowered the institutional barriers and opened up new space for the long-term development of the above cultural sectors.
ECONOMIC ENVIRONMENT
China's rapid and vigorous economic growth sets a solid foundation for the development of the book publishing industry. In 2003, China's GDP amounted to RMB 11.67 trillion, up 9.1% from 2002 at comparable prices.4 The per capita GDP was RMB 9,101, 5.57 times that of the 1990 figure (RMB 1,634). Total fixed-asset investment was RMB 5.556 trillion, up 27.7% over 2002. In 2004, China's GDP amounted to RMB 13.65trillion, a growth of 9.5% over 2003 at comparable prices.5 According to the 2004 revised statistics of the National Bureau of Statistics, China's GDP was US$1.9317
3 The Three Represents was a concept put forward by Jiang Zemin, former Chinese president in 2000. According to the concept, the Communist Party of China represents the development trends of advanced productive forces, represents the orientations of an advanced culture, and represents the fundamental interests of the overwhelming majority of the people of China.
trillion, with the per capita GDP at US$1,490. With growing economic aggregate, people's standards of living in both urban and rural areas have greatly improved. In 2003, the per capita disposable income of urban residents was RMB 8,472, a growth of 9.0% in real terms (on inflation-adjusted basis). The per capita net income of rural residents was RMB 2,622.2, an increase of 4.3% in real terms.6 In 2004, the per capita disposable income of urban residents was RMB 9,422, a growth of 7.7% in real terms. The per capita net income of rural residents was RMB 2,936, a rise of 6.8% in real terms, the largest yearly growth since 1997.7 In 2003, the Engel Coefficient of China's urban households was 37.1%, a drop of 0.6% over 2002; that of rural households was 45.6%, a decrease of 0.6% over 2002. In 2003, the per capita expenditure of urban residents on education, culture, and recreation was RMB 934, an increase of 3.6% over 2002; while in developed regions, such as Beijing and Shanghai, the figure was over RMB 1,800.8
In 2003, China's per capita GDP exceeded US$1,000 for the first time. Based on the experience of other countries, a per capita GDP of over US$1,000 symbolizes that the country's economic development has entered a new stage and the social consumption structure will gradually be upgraded to become development-and recreation-oriented. This will bring about important changes in investment and production structure, contributing to rapid and sustainable economic development. Generally, book publishing, as a sector of the tertiary industry, is closely linked with the economic aggregate of a country. If the national economic development is stagnating, book publishing can hardly grow fast, whereas a healthy and sustainable national economy will advance book publishing.
The improvement of the socialist market economic system draws a blueprint for the book publishing industry. From 2003 to 2004, China's economic restructuring made great progress in such fields as strengthening macro control, promoting opening-up in an all-round way, and transforming the means of economic growth. Reform and development over the years has led to a consensus in the press and publication industry: If China's publishing industry is to sustain development, it needs to give full play to the market factors in publication resource allocation. As publications are intellectual products with strong social effects, publication administrative departments should improve macro control and strengthen effective administration over the publishing industry in order to help publishers reap social and economic benefits.
Economic policies are a major component of an industry's economic environment. To promote the development of the book publishing industry, the Chinese government has formulated a series of financial and banking policies on financial appropriation or subsidies. Financial support for the publishing industry comes mainly from foundations and covers academic works, key national publications, technological upgrading, and the construction of a distribution network in the form of direct subsidies and awards.
6China Statistical Yearbook 2004. China Statistical Publishing House (Beijing, 2004) 53, 187, 355.
After the taxation reform of 1994, the Ministry of Finance and State Administration of Taxation issued notices to continue preferential financial and taxation policies in support of the development of publicity and cultural organizations. These organizations were able to adopt a method of paying tax then claiming refunds for seven publication categories, including newspapers and periodicals run by government organizations, textbooks for schools and universities, newspapers and periodicals for children, science and technology books, and science and technology periodicals. The financial reports of central and provincial governments should decide their budget according to the actual tax receipts from publicity and cultural enterprises in the previous year and set up "special funds for publicity and cultural development." Based on this, the GAPP released the Methods for Managing Special Funds for Publishing Development, stating that the special funds can be used with or without obligation for publishing development projects in seven ways, such as the publication of high-quality academic works and key books advocated by the government, and awards for high-quality publications and products. In 1996, the State Council issued the Regulations on Improving Cultural and Economic Policies Formulated in the Ninth Five-Year Plan Period (1996–2000). The method of paying tax and applying for refunds would still apply to seven categories of publications promulgated by the Ministry of Finance and State Administration of Taxation in 1994, and value-added tax (VAT) of Xinhua bookstores and rural supply and marketing cooperatives selling publications at the county level and below. The Regulations also included requirements for improving the system of Special Funds for Publishing Development. In 1997, the National Commission of Science and Technology, the Ministry of Finance, and the GAPP together issued the Interim Measures for Managing Funds of Publishing National Academic Works on Science and Technology, deciding to subsidize the publication of academic works on science and technology, fundamental theoretical works, and works on applied technology. The government also set up special publishing funds for projects on social sciences. Some provinces and cities also established special publishing funds for high-quality academic works. The Ministry of Finance allocated special funds to support large publishing projects, such as the project compiling the history of the Qing dynasty, Ancient Chinese Book Recompilation Project, and the Chinese Classics publishing project. The central government also allocates money for the publication of works by and for ethnic minorities. In addition to various funds, the government also supports the publishing industry by means of government procurement. For instance, the government bought primary and high school textbooks which were provided free of charge to students in impoverished areas in central and western China; the Committee of Spiritual Civilization Development and the Ministry of Civil Affairs implemented the Plan Aiding the Building of Libraries in 10,000 Communities and the Reading Project in 10,000 Communities. These methods all improved the development of the publishing industry.
Taxation measures are also part of the financial policies. Compulsory and voluntary, different tax rates are imposed on different publishers and publications in order to regulate the publishing industry. Taxation measures can help regulate publication resource allocation and lead the industry in a direction conforming to the national interest. To help promote the publishing industry, the Chinese government has implemented some taxation measures in its favor. For instance, the VAT rate is 13%, 4% lower than in other industries. Electronic publications enjoy the same preferential VAT for the software industry at a rate of 17% (before 2010). Part of the tax burden exceeding 3% will be refunded.
To optimize the publication structure, the Chinese government implements preferential tax measures on some categories of publications, such as textbooks and science and technology books. In 2001, the Ministry of Finance and the State Administration of Taxation issued the Notice on the Policy of Value-Added Tax of Publications and Film Copies and Film Distribution and Sales Tax, providing that before the end of 2005, the tax refund will be used to collect VAT in the publishing sector. The areas eligible are: textbooks for primary and high schools, colleges and universities (including secondary technical schools); science and technological books that are formally published books with a Chinese ISBN covering Marxism, Leninism, Mao Zedong Thought; philosophy, politics, law, military affairs, economics, history, geography, general instructions of natural sciences, mathematics, physics, chemistry, astronomy, geoscience, bioscience, medicine, healthcare, agricultural science, industrial technology, transportation, aeronautics and astronautics, environmental science, labor safety science (safety science), ethnic minority languages, and Braille. The refund method will also be used to collect VAT from Xinhua bookstores and the rural supply and marketing cooperatives selling publications at county level (including county-level city) and below.
China's banking policies for publishing cover mainly credit loan, investment, and financing. For credit loan, the Chinese government guarantees seasonal loans as reserve funds for textbooks for primary and high schools, secondary technical schools, colleges, and universities. Publishers engaged in new publication development, technical upgrading, and those who have a deficit in their circulation fund, can borrow special state publishing funds for a maximum of two years at an annual interest rate of 3%. In order to promote the formation of publishing groups, the government grants pilot groups preferential investment and financing terms. The GAPP regulations in this area are contained in documents such as the Opinions on the Formation of Press and Publishing Groups. All these policies have effectively promoted the reform and development of China's book publishing industry.
CULTURAL ENVIRONMENT
Cultural environment is an important background for the book publishing industry. As a critical component of the culture industry, the book publishing industry is based on certain social and cultural conditions. People's education level and changes in their demands for social culture have a significant impact on the development of the book publishing industry.
As China's overall national strength is growing, education plays a greater role in economic development and social progress. Since the policies of reform and opening up were implemented, China's educational undertakings at various levels have made great achievements in concept, scale, quality, and many other aspects. By the end of 2004, the campaign to make the nine-year compulsory education universal and eliminate illiteracy among adolescents has covered 93.6% of the total population.9 Since 1999, China's higher education has enjoyed increasing enrollment. In 2003, over 19 million people were receiving higher education in different forms, about 2.2 times that of 1998. The gross enrollment rate rose to 17%10 with 86.3 undergraduates in every 1,000 people.11 In 2004, higher education enrollment across the country reached 4.473 million.12 In 2003, there were 14,700 secondary vocational schools which enrolled 5,157,500 students with a total student population reaching 12,567,300, 659,200 students more than the previous year.
Private education has also developed fast. In 2004, China had 228 private students and adult colleges across the country with 1,397,500 students, as well as 1,187 other types of private institutions of higher education with a total of 1,053,300 registered students.13 To solve problems troubling traditional education, China's education circles introduced competence-oriented education, which is now widely accepted. Education in China has gradually transformed from an examination-oriented mode to one that is oriented more toward students' overall development.
The rapid development of education has had an extensive and profound influence on the book publishing industry. The Chinese traditionally attach enormous importance to education. In recent years, both urban and rural residents have been increasing their investment in education. In 2003, the per capita educational expense of urban residents reached RMB 514, accounting for 7.9% of total income expenditure. Urban residents spent on average RMB 36.3 on textbooks, with the figure for Shanghai residents reaching RMB 82.62.14 Educational development creates a huge market for book publishing, fueling the industry's rapid development. Universal education and the rising level of education have created millions of potential consumers with a fairly high consumer ability—a favorable condition for the long-term development and stability of the book publishing industry.
In recent years, the Chinese government has increased input into the cultural infrastructure, increasing the number of public cultural facilities. At the end of 2004, there were 2,858 cultural centers, 2,710 public libraries, and 1,509 museums in China. The government also supports cultural undertakings by establishing community and countryside libraries.
New cultural sectors are also developing rapidly and expanding their influence. The variety of electronic publications has grown fast along with their sales revenue, especially the online-game industry. The GAPP launched the China National Online Game Publishing Project to promote independent online-game publications. The diversification
11China Statistical Yearbook 2004, 785.
13Statistical Communiqué on National Educational Development in 2004.
of social culture has brought new challenges as well as great market opportunities for the book publishing industry. In a society lacking a liquidity mechanism and featuring a single social culture, students are almost the only support for the book publishing industry. Over reliance on the school and educational market will inevitably cause problems, creating an imbalance in the industry structure and narrowing the development space. As the demand increases for a diversified social culture, specific social groups and individuals want to choose those cultural products that are helpful for self-development. Undoubtedly, this change will give rise to highly differentiated reading needs. The book publishing industry will have to face the increasing demand for personalized book consumption, while satisfying the needs for educational books. This not only opens up a broader market for the sustainable development of the book publishing industry, but also requires higher standards in administration, industry structure, market openness, and human resources. With the rapid growth of the Internet and digital technologies, electronic publishing will have a more important role to play in the overall publishing industry.
LEGISLATIVE ENVIRONMENT
Sound legislation is important for the smooth development of an industry. In order to adapt to a socialist market economy (especially international practices after entry into the WTO), the Chinese government and the press and publication administrative departments made a large-scale revision of rules and regulations on press and publication in light of China's commitments made to the WTO and its national condition.
The Administrative License Law of the People's Republic of China, promulgated in 2004, has the greatest influence on the macro control of the press and publishing industry. The law standardizes the range, category, procedure, supervision, and fee of administrative licensing. In accordance with the law, the GAPP announced 45 items still requiring administrative licensing. In 2003 and 2004, it abolished 173 regulations and legal documents. In 2004, the GAPP continued to screen projects for administrative examination and regulations on licensing, keeping 36 of all original items as approved by the State Council. In accordance with the law, the GAPP reviewed the basis, conditions, procedures, duration, and agency of administrative licensing, and specified each item and form based on the principle of one form, one item, and then publicized the information. The provincial administrations of press and publication also made greater efforts to reform the administrative examination system in accordance with the law. All these measures are of great significance in promoting the transformation of government functions, strengthening and perfecting macro-management of the press and publishing industry, and encouraging administration by law, regulation, and scientific methods.
Since 2001, China has revised copyright-related laws and regulations. The revised Copyright Law of the People's Republic of China, Regulations for the Implementation of the Copyright Law of the PRC, and Regulations for the Protection of Computer Software are more adequate and mature in both form and content, meeting the requirements of China's market economy and international rules. The State Council and the GAPP also revised and issued a series of laws and regulations:
- Regulations on the Administration of Publication
- Regulations on the Administration of Audio and Video Products
- Regulations on the Administration of the Printing Industry
- Provisions on the Administration of Newspaper Publication
- Provisions on the Administration of Periodical Publication
- Interim Provisions on the Administration of Internet Publication
- Provisions on the Administration for Undertaking Printing
- Provisions on the Administration of the Publications Market
- Measures on the Administration of Foreign-Funded Distribution Enterprises of Books, Newspapers, and Journals.
A legal framework based on China's national conditions has been established, providing legal guarantees for the reform and development of the publishing industry.
A sound legislative system demands a complete legal framework, but more importantly laws should be enforced. Strict enforcement and the prosecution of offenders are essential. In recent years, the Chinese government has made remarkable progress in enforcing laws pertaining to printing and publication and is highly rated by international counterparts. First, it promulgated the Administrative License Law to regulate governmental administrative behaviors. Second, it revised and strictly enforced laws and regulations on the protection of intellectual property, safeguarding the rights and interests of copyright holders and intensifying the combat against copyright infringement. Third, the setting up of a supervisory system for book publishing from central to local governments has resulted in a timely oversight of content, quality, publishing, and distribution. Fourth, many of China's provinces and cities have established special units for enforcing press and publication administrative laws and invested more human and physical resources. Fifth, the government is enhancing the public awareness of copyright protection and intellectual property rights through a variety of media messages aimed at building an innovative country and creating a law-abiding environment for its citizens. Sixth, the government has launched campaigns to fight against pornography, illegal publications, and piracy to curb the trend of copyright infringement.
TECHNOLOGICAL ENVIRONMENT
Since the 1990s, digital and Internet technologies have transformed people's way of life and learning methods. According to the 15th Statistical Report on China's Internet Development issued by the China Internet Network Information Center (CNNIC) on January 19, 2005, China's Internet users reached 94 million as of the end of 2004, up 8% from the same period of 2003. Broadband subscribers reached 42.8 million with 41.6 million computers connected with the Internet, an increase of 14.6%. Domain names and websites registered under CN reached 430,000 and 669,000 respectively, 50,000 and 43,000 more than in the previous six months. The total international Internet bandwidth reached 74,429 MB, and the IPv4 (fourth version of Internet protocol) addresses reached 59,945,728, up 34.8% and 44% respectively from the previous year. The new trend represented by digital and Internet technologies is exerting a greater influence on China's book publishing industry. The technological revolution has ushered in a brand new era for publication, bringing dramatic changes to each sector of the industry, ranging from writing and editing to printing and selling.
Digital and Internet technologies have shortened the publication cycle by a large margin. The new technologies allow online information to spread at an incredible speed. The data that in the past we had to look up in a library can now be obtained at home with the click of a mouse. Some rare copies—and even unique texts—are now made available to researchers through digital technology, which in the past was impossible. Writers across the world acquire information and exchange ideas through digital and Internet technologies, helping improve the efficiency of book creation. In the conventional publishing process, editors need to read numerous manuscripts and keep in touch with writers, printers, and distributors. In the digital age, editors can not only use advanced proofreading software to effectively reduce mistakes, but also realize real-time contact with all sectors of the publication process through the Internet, thus reducing significantly the average time and workload for producing a book.
As online publishing gains momentum, new publishing methods, such as e-book, print-on-demand, and web-enabled mobile phone, are emerging. Many of the world's publishing houses have established online publishing departments, selling digitized books directly online. By the end of 2003, the United States had published over 60,000 e-book titles; the net sales revenue increased from US$211,000 in January 2002 to over US$3.3 million in January 2003, a growth of 1447.4%.15 Chinese publishers have also recognized the potential of e-books and more and more of them are engaged in online publishing. To satisfy the needs of these presses, diverse online publishing platforms have been developed.
With the spread of Internet technology, the online distribution industry represented by online bookstores is witnessing vigorous growth both in China and overseas. Online bookstores break the limits of time and space, enabling readers to select and buy books any time, anywhere. Online bookstores provide lower prices due to reduced costs in store operation, personnel, storage, and logistics. In spite of the lack of a sound logistics system and payment platform, China's online bookstores have attracted more and more readers with their reader-oriented services, assorted products, lower prices, and highly differentiated marketing strategies.
China's book publishing industry went through significant changes from 2003 to 2004. The growing international culture industry has highlighted the prospects for China's book publishing and culture industries. Theories, such as the building of an all-round, well-off society, the scientific outlook on development, and increasing cultural productivity, have brought new historical opportunities for the reform and expansion of the book publishing industry. Improving legislation and law enforcement have guaranteed the advancement of the publishing industry. A series of policies aimed at encouraging the healthy development of the industry has played an important role in
sustaining its progress in conjunction with the sound development of China's economy. Educational improvement and diversified cultural demands have created huge growth potential for publishing. The spread of digital and Internet technologies has not only reshaped the publishing industry, but also opened up a broader space for its future development.