Chapter 3
Supply and Demand Analysis of China's Book Publishing Industry

Books are a special kind of commodity. Like other commodities, the conflict between its supply and demand affects market development. But book supply and demand is also different from that of other commodities, having its own rules. The supply- demand analysis of China's book publishing industry can help us understand the market environment of the industry.

FACTORS AFFECTING BOOK SUPPLY AND DEMAND

FACTORS AFFECTING BOOK DEMAND

Just like any other consumer products, book demand is influenced by a variety of factors, including social, political, and economic environment, investment structure, individual consumption structure, consumer preference, population, price of consumer goods, price of substitutes, and so on.

Reading and Buying Inclinations According to a sample survey conducted in 2004 on the reading and buying inclinations of people across China, 51.7% of the literate population said that they read once or more every month, showing a declining reading rate compared with the 1999 and 2001 surveys. Taking into account the total samples of literate population, the reading rate decreased by 8.7% in 2003 over 1999, with figures for urban residents decreasing by 7.8% and rural residents by 9.6%.

However, as China is transforming into a knowledge-based society, the demand for books is growing. Results of the 1999, 2001, and 2003 surveys show that 85.8%, 92.0%, and 87.7% of respondents thought that reading was becoming increasingly important. At the same time, books are becoming more affordable.

When asked for the reasons why they were not reading, 50.6% of respondents chose "no time," while 4.7% chose "financial difficulties." At the same time, the emerging new media had further reduced people's limited reading time (see Table 3.3).

The above data show that high book prices are one of the reasons for the declining reading rate. However, the major reason is that people live a fast-paced life and are busy with work and study, leaving little time for reading.

Price, Substitutes, Income, and Other Factors The price elasticity of book demand needs to be analyzed specifically. The demand for textbooks is very strong and is therefore hardly subject to price influence. However, the demand for trade books is diverse and random, showing a higher price elasticity, which means that a change in price is likely to result in a change in demand. Therefore, we need to make category-based investigations as each category is governed by a specific law of supply and demand.

The Sample Survey Report on the Reading and Buying Inclinations of People across China (2004) compiled by the China Institute of Publishing Science shows that when people turn to media for information, the proportions of those taking a book as their first choice vary with different media functions (see Table 3.4).

Table 3.4 shows a higher proportion for functions related to job, study, and professional knowledge. In other words, Chinese readers use books mainly to acquire professional information related to their work and studies. Such a demand can be viewed as a necessity.

In addition, the demand for books is also influenced by substitution effects. Many information products can substitute for books, such as newspapers, magazines, radio, television, VCDs, and modern electronic or digital products, especially the Internet. Among these substitutes, new media, such as the Internet, have rapidly emerged as a new force causing great changes to people's habit of media contact. According to the Sample Survey Report (2004), although books ranked third with 42.1% in terms of the average media contact rate, VCD (DVD) was close to books with 41.1%, and the Internet showed a strong growth momentum with 19%.

The demand for books is also influenced by income. When social income reaches a certain level, the proportion of total expendicture on cultural products will increase correspondingly. China is currently experiencing a social transformation. In recent years, China's GDP has maintained rapid growth, remaining over 8% since 2000 (see Table 3.5). People's demand for cultural products has been on the rise day by day, creating opportunities for the book publishing industry.

Readers' personal preferences, such as reading habits, also exert a great impact on the general book demand. Although the Chinese nation traditionally loves to read, the reading rate has been decreasing over the past five years. Thus, the book publishing industry and the society as a whole should work together to promote good reading habits and build up a learning society.

FACTORS AFFECTING BOOK SUPPLY

Book supply in China is becoming market oriented. The market for trade books is improving, while publishers, as book suppliers, attach more importance to readers' demands and plan publishing accordingly.

As a market-oriented enterprise and market entity, a publisher has to take cost and profit into consideration. As a result, publication costs are an important factor in determining book supply. Costs include paper, production, management, royalties, and marketing.

Paper is the most important component of book publication costing and any change in paper prices has a huge influence on book price. For instance, the period-on-period book price increases in 1988 and 1989 were both around 35% because the government had gradually cut down wood price subsidies, resulting in a price rise of printing paper. In 1980, newsprint was RMB 730/ton, but rose to RMB 3,800/ton in 1993.¹The rise in paper prices in 1995 directly caused the rise in book prices. Total printed sheets for 1996 increased by 13.8% over 1995, while total gross sales increased by 42.1%. In 2004, newsprint was about RMB 6,000/ton, while writing paper and offset paper for publication were both over RMB 5,000/ton, contributing to the rise in book prices.

Authors' royalties also affect book supply. As readers' demand for quality content grows and the government strengthens copyright protection, well-known authors demand higher royalties. As a result, royalties now account for an increasingly high proportion of the total cost for book publication.

Books are a product that is reliant on economies of scale. Their cost can vary enormously with the size of print runs. Generally, the cost of a book accounts for 30% to 50% of its retail price and therefore the fluctuation of the retail price will

¹ Wei Yushan, "A Comparative Study of Book Prices," Media (March 2004).

greatly reduce supply elasticity. Costs in the sales sector, including transportation cost, wholesaler and retailer cost, have a substantial influence on book supply as well.

In addition, the progress of technology also affects the structure of book production cost. With improved production technology, publishers can produce more copies at reduced costs (for input, design and layout, typesetting, printing, and binding), shorten the supply period, and improve product quality and production efficiency, resulting in lowered supply prices, a moving supply curve, and increased supply quantity.

SUPPLY AND DEMAND IN CHINA'S BOOK PUBLISHING INDUSTRY

SUPPLY OF BOOKS BY CATEGORY

Table 3.6 sums up the supply statistics of all 22 categories of books according to the CLC classification method.

Analysis of Titles In 2004, the category of Culture, Science, Education, and Physical Education had most titles, accounting for 40.54% of the total number of titles produced. Next were Industrial Technology and Economics. The sum of the above three categories accounted for about 60% of total titles.

In the same year, the aeronautics and astronautics (A&A) category experienced a growth of 39.7%, the fastest of all 22 categories, followed by 36.3% for the astronomy and geoscience category. Published titles in the categories of Marxism, Leninism, and Maoism, Philosophy, Social Science, Economics, Linguistics, History and Geography, Mathematics, Physics, and Chemistry, Bioscience, Industrial Technology, Environmental Science, and Labor Security all increased by over 10%.

Despite that the CLC classifications differ somewhat from other countries, statistics can still show that China's distribution of book titles in the various categories vary greatly from that of developed countries.

Despite different book classifications and data of different years, Table 3.7 still shows a huge difference in published titles in some categories. In China, titles on Culture, Science, Education, and Physical Education amounted to 40.54% of the total published titles. In France, Culture and Education made up 5.97% of the total, while in the United States, Education only accounted for 3.05% of total published titles. In addition, China's Industrial Technology made up 12.93% of total published titles and Economics, 7.89%. In France, they were 0.55% and 2.81% respectively, while the Economics category accounted for 6.27% of total titles in the United States. The book publishing industry is closely related to the politics, economy, and culture of a country, resulting in different countries exhibiting different features in book structure. Textbooks and teaching supplements figure prominently in China's book product structure. China cannot promote the international competitiveness of its book publishing industry until it reduces its overdependence on textbooks and teaching supplements and further optimizes its book product structure.

New, Republished, and Reprinted Titles Table 3.8 includes statistics of new, republished, and reprinted titles between 2003 and 2004, showing that the Culture, Science, Education, and Physical Education category had the largest number of new titles. In 2004, categories with a republication/reprint rate of over 40% were, in descending order, the Culture, Science, Education, and Physical Education category, Industrial Technology, the Mathematics, Physics, and Chemistry, Medicine and Hygiene, and Linguistics. The overall republication/reprint rate was 40.25%.

Impressions, Circulation, and Stock Impressions, circulation, and stock are three interrelated statistical indices that reflect the actual situation of book production and sales. In 2003, seven categories had impressions of over 100 million copies: the Culture, Science, Education, and Physical Education category, Literature, Economics, Politics and Law, Art, Linguistics, and Industrial Technology. In 2004, History and Geography replaced Politics and Law as one of the seven categories with an impression of over 100 million copies. In 2003, the Culture, Science, Education, and Physical Education category had impressions of over 2.87 billion copies, holding an overwhelming position in total impressions. In 2004, this category witnessed a slight decline with 2.65 billion impressions.

The Culture, Science, Education, and Physical Education category also enjoyed an obvious advantage in quantity. In 2003 and 2004, 2.61 billion and 2.32 billion copies were sold respectively.

Books on astronomy and geosciences had the highest stock-impression ratio, followed in descending order by Linguistics, Agriculture Science, A&A, Politics and Law, Environmental Science, Mathematics, Physics and Chemistry, and Bioscience. Categories with a low stock-impression ratio were the Culture, Science, Education, and Physical Education category and the History and Geography category, with the latter having the lowest ratio.

SBD, Sales Revenue, and Stock Value by List Price SBD, sales revenue, and stock value by list price are three interrelated indices that represent the situation of book production and sales in the form of currency and therefore can reflect the situation of the book publishing industry more precisely than the number of copies.

In 2004, the total SBD of China reached RMB 49.388 billion, sales revenue RMB 27.228 billion, and stock value by list price RMB 28.245 billion. The Culture, Science, Education, and Physical Education category ranked first in all three indices, since educational books (textbooks and teaching supplements) are included in this category. The Technology, Economics, and Linguistics categories also occupied important positions.

As for SBD, the categories with a high growth rate in 2004 were (in descending order) the Mathematics, Physics, and Chemistry category, Environmental Science, Military Science, Philosophy and Religion, and Bioscience. The SBD of Mathematics, Physics, and Chemistry grew by 106.19%.

With regard to sales revenue, linguistics books enjoyed the largest growth of 115.04%. Categories with a growth of over 50% also included Medicine and Hygiene, Literature, and the Mathematics, Physics, and Chemistry. Eleven categories saw a fall in sales revenue, among which Astronomy and Geoscience decreased by 40.21%.

Stock value by list price of three categories grew by over 100% in 2004: Astronomy and Geoscience, Linguistics, and the Mathematics, Physics, and Chemistry, with the first achieving an amazing growth of 773.14%.

CHINA'S BOOK DEMAND BASED ON ANALYSIS OF EIGHT CATEGORIES

To explain the demand for books, we made a case study based on the top 100, according to the copies sold, out of the eight major categories. These books have received a great deal of attention from the publishing industry.

Books on Ideology and Politics The year 2003 was the centenary of Mao Zedong's birth and 2004 the centenary of Deng Xiaoping's birth, two events that stimulated the demand for related books. In addition, textbooks of two college courses (Marxist Political Theory and Ideological and Moral Education) had a rather high proportion in this category. Books with a large circulation in this category were mostly political theory textbooks, such as Introduction to Deng Xiaoping Theory, General Introduction to Deng Xiaoping Theory and the Gist of Three Represents, and Introduction to Mao Zedong Thought.

Books on theoretical issues that concerned the people also sold well. For instance, Eighteen Hot Theoretical Issues, compiled by the Publicity Department of the CPC Central Committee, had a circulation of five million copies.

Books on Business and Economics The top 100 books on business and economics mainly included three kinds: textbooks, such as Strategic Management and Fundamentals of Management; bestsellers expounding on management problems that relate to professional managers and general managerial personnel, such as Monkey King: A Good Employee, OnThree Kingdoms from a Managerial View, Jack: Straight from the Gut (2nd edition), Built to Last: Successful Habits of Visionary Companies, and Positioning; government publications, such as books about the fifth set of RMB notes and series books about the corporate accounting system.

Most of the top-ranking books on business and economics were published by Central publishers, including China Financial Publishing House, China Renmin University Press, Economic Science Press, China Financial and Economical Publishing House, and CITIC Publishing House. Books published by China Financial Publishing House are mainly government announcements; books by Economic Science Press and China Financial and Economical Publishing House are largely about accounting systems and norms; and books by CITIC Publishing House are mostly general books on business and economics. General books on business and economics with the largest circulation included: OnThree Kingdoms from a Managerial View with a circulation of 644,000 copies, Monkey King: A Good Employee, 167,000 copies, From Good to Great, 67,000 copies, and Built to Last: Successful Habits of Visionary Companies, 46,000 copies. Most books on business and economics published by China Renmin University Press were classic textbooks introduced from foreign publishers.

With the exception of government-announcement books, the list price of most books is RMB 20-40. More than 20 titles had a circulation of more than 100,000 copies, and all the top 100 titles had a circulation of over 34,000 copies. Business and economics bestsellers included imported books such as Jack: Straight from the Gut (2nd edition), Built to Last: Successful Habits of Visionary Companies, and Positioning, as well as books written by Chinese authors, such as Monkey King: A Good Employee and On Three Kingdoms from a Managerial View.

Self-Improvement Books People are becoming more aware of the vital importance of psychological health. This has stimulated the demand for self-improvement books. A Message to Garcia had the largest circulation in 2004 of 300,000 copies, for both paperback and hardcover, and Seven Psychological Games reached 146,000 copies.

Literary Books Only literary books with a circulation of over 84,000 copies can be listed among the top 100. More than 20 titles had a circulation of over 200,000 copies, including Cloth Tiger Series-City of Fantasy and Wolf Totem, each having sold 500,000 copies. Most of the top 100 titles in this category were published by Chunfeng Literature and Art Publishing House, Changjiang Literature and Art Press, the People's Literature Publishing House, Jieli Publishing House, and Writers Publishing House. More than50% of the top 100 were republished titles, including the four Great Classics (A Dream of Red Mansions, Journey to the West, Romance of the Three Kingdoms, and Outlaws of the Marsh) and other masterpieces, such as Border Town, Camel Xiangzi, and Besieged City. This shows that literary books are more likely to become long-term sellers.

Literary publications interact very often with other media. Examples in this regard include the Harry Potter books and movies, the novel and TV play Chinese-style Divorce, press coverage of Ren Changxia's deeds and the nonfiction Ren Changxia. Here different media worked together and stimulated book sales.

Series books take a comparatively high proportion in the literature category. Among the top 100 are the Cloth Tiger Youth Literature series, the Mischief Ma Xiaotiao series, and the Harry Potter series.

Books on Life As living standards improve, people are more concerned with the quality of life. On the one hand, people pay more attention to health, and thus books on self-improvement, good health, and fitness have become popular. On the other, the change in lifestyle has stimulated the demand for related books. For instance, popular recreational activities, such as free travel, have greatly stimulated the sales of books on transportation and tourist maps. The development of food culture has also made food books popular.

Medicine and health-care books with the largest circulation fall into the following four categories: first, general medical books, such as Family Almanac (200,000 copies sold) and Family Doctor Five Yuan Series (over 160,000 copies); second, childcare, such as A Must-read for Parents-to-be, Breastfeeding, New Mother and Baby Series: 40 Weeks of Healthy Pregnancy (2nd Edition); third, fitness titles, such as Yoga: For Beauty and Health, Beauty Yoga, and Healthy 3-1-2 Exercise for Main and Collateral Channels; fourth, books on particular diseases, for instance, books on the prevention of infectious diseases had a large circulation due to the outbreak of SARS and bird flu and the publicity on the prevention and treatment of AIDS and venereal diseases.

As for travel books, Beijing Transportation and Tourism Map 2004 obtained a circulation of 1.16 million copies, and Guangzhou Tour Guide, Shenzhen Tour Guide, and Zhongshan Tour Guide about 50,000 copies each. Choice Food Guide in Guangdong had 40,000 copies sold.

Books for Rural Readers In recent years, the government has attached great importance to the publishing and distribution of books for rural readers. Publishing houses have tried every means to increase the variety and quantity of books about agriculture, countryside, and farmers.

Books on agricultural science and technology are popular. For example, the circulation of Methane User's Manual reached 290,000 copies. However, the circulation of all agricultural titles was comparatively small and any title with a circulation of 10,000 copies can enter the top 100. In addition, agricultural books are comparatively cheap, most of the top 100 being priced less than RMB 10. This indicates the high price sensitivity of rural readers. Books with a low price and practical content will be popular among farmers.

Computer Books As personal computers and the Internet become popular, people's demand for computer books is on the rise. Various computer-related certification examinations have also contributed to the mounting demand. Two kinds of computer books have a large circulation: one is examination books, such as Syllabus and Sample Questions for theNational Band Examination on Computer Fundamentals and Application Ability and Programmers' Book (designated for the Qualification Certificate of Computer and Software Technology Proficiency of China); the other is computer operating manuals for beginners, such as Computer Training School from Scratch: Image Processing with Photoshop 7.0 in Chinese Version and Easy to Learn and Usefor Computer Beginners.

Children's Books Since the press and publishing industry plays an important role in the moral education of minors, the government has always attached great importance to the publication of children's books. This, together with the competence-oriented education, stimulates the market demand for children's books. Educational books on arithmetic and pinyin ranked highest among children's books. For example, Wall Map of Chinese Pinyin, Babies Learning to Write Chinese Characters, and Addition and Subtraction Questions for Babies all had a circulation of over 100,000 copies. Children's books imparting knowledge are popular, although there are few books for fostering children's morality and interests. Cartoon books also have a place, for instance, the Cat and Dog has had over 100,000 copies sold.

Analysis of the above eight categories shows that the product structure of China's book publishing industry is still unsatisfactory. Problems remain, such as too many imported titles on the list of bestsellers and a serious lack of titles for rural readers and original children's books.

SUPPLY AND DEMAND OF EDUCATIONAL BOOKS

In China, educational books (textbooks and teaching supplements) occupy an important position in the book publishing industry in terms of published titles, SBD, and sales revenue. In this section we will analyze separately the supply and demand of textbooks and teaching supplements.

DEMAND FOR EDUCATIONAL BOOKS

According to the Statistical Communiqué on National Education Development in 2003 released by the Ministry of Education, educational books for different school ages face different opportunities and challenges.²

Demand for Primary- and Middle-School Educational Books Although the enrollment rate of primary school-age children has reached 98.65% in China, the numbers

² All data in this section are from the Statistical Communiqué on National Education Development in 2003 compiled by the Ministry of Education.

of primary schools and enrolled students as well as the student population continue to decrease due to school redistribution and a gradually declining school-age population. In 2003, total primary school enrollment in China was 18.294 million, down 1.234 million from 2002; the total primary student population was 116.897 million, a decrease of 4.67 million over 2002.

For middle schools, the gross enrollment rate in 2003 reached 92.7%, an increase of 2.7% over 2002. The enrollment of middle schools decreased slightly due to the implementation of the nine-year compulsory education and the gradual decline in school-age population, but the size of total student population increased slightly. In 2003, Chinese middle schools enrolled 22.201 million students, a decrease of 616,900 over 2002; the total student population stood at 66.908 million, up by 34,000 over 2002.

The above data indicate that the enrollment rate of primary schools has approached 100%, while that of middle schools has exceeded 90%, meaning that compulsory education has basically been made universal. Furthermore, measures such as those aimed to lighten the academic burden on primary and middle school students and change the mode of compulsory education will reduce the demand for educational books. Therefore, the demand for primary and middle school educational books will not grow substantially in the future; on the contrary, the overall demand will drop due to a declining enrollment.

Demand for High School Educational Books In 2003, all high schools in China (including ordinary high schools, vocational high schools, specialized secondary schools, technical schools, adult high schools, and adult specialized secondary schools) enrolled 12.679 million students, an increase of 871,500 over 2002. The total student population was 32.434 million, an increase of 3.352 million over 2002. The gross enrollment rate was 43.8%. Ordinary high schools enrolled a total of 7.521 million students, an increase of 754,300 over 2002. The total student population reached 19.648 million, an increase of 2.81 million or 16.69% over 2002.

The gross enrollment rate for high schools was only 43.8%. As people's incomes rise, they will try to improve their education, which in turn increases the gross enrollment rate of high schools. Therefore, there is still a potential for growth in the demand for high-school educational books.

Demand for Higher Education Books In 2003, the enrollment and student population of institutions of higher education continued to increase. In that year, the total number of students in higher education institutions was more than 19 million, and the gross enrollment rate reached 17%. A total of 268,900 postgraduate students were enrolled, an increase of 66,300 over 2002. Of these, 48,700 were doctoral students and 220,200 master candidates. The postgraduate population was 651,300, an increase of 150,300 over the previous year, out of which 136,700 were doctoral candidates and 514,600 master candidates. In 2003, China's regular higher education institutions enrolled 3.82 million students, an increase of 616,700 students or 19.24% over 2002. The student population was 11.085 million, an increase of 2.05 million students or 22.72% up from 2002.

As China's higher education institutions continue to expand their enrollment, it is becoming more difficult for graduating undergraduates to land jobs. Consequently, more college graduates choose to further their education. This has boosted the demand for higher education books. The growing high school student population and the increasing college enrollment have helped sustain the rising demand for this type of books. In 2004, college and university enrollment reached 4.2 million.³ At the National Meeting on Higher Education Enrollment Planning in January 2005, it was decided that in 2005 the planned enrollment for junior college and university students would be 4.75 million, up around 8% over the actual enrollment of 2004. The planned enrollment for master candidates would be 316,000, an increase of 15% over 2004. The planned enrollment for doctoral candidates was 55,000, an increase of 2% over 2004.⁴The continuous expansion of higher education has helped increase the demand for higher education books.

The market for educational books will continue to expand, thanks to the growing population eligible for education and the improving educational quality. In addition, the goal to improve the cultural qualities of everyone will further stimulate this demand.

³ Xinhua Net, "2004: China's Higher Education Balancing between Scale and Quality," http://news.xinhuanet.com/newscenter/2004-12/24/content_2374778.htm (Accessed May 2007).

⁴ Xinhua Net, "The Ministry of Education Held the 2005 Higher Education Enrollment Planning Meeting," http://news.xinhuanet.com/edu/2005-01/14/content_2460337.htm (Accessed May 2007).

ANALYSIS OF TEXTBOOK SUPPLY

Total, New, Republished, and Reprinted Titles Table 3.9 shows that textbooks published in 2004 made up 17.33% of all books. New textbooks only accounted for 10.80% of all new titles. Impressions, printed sheets, and gross sales were 51%, 47.21%, and 37.35% respectively of all books. It is clear that textbooks feature a small number of titles, large impressions, and high gross sales, thus benefiting most from economies of scale.

Unlike trade books, textbooks had an extremely high republication and reprint rate of 67.42%, much higher than the average rate of 41.62% for all books. For this reason, most publishers show great interest in the market of textbooks.

Analysis of Seven Categories of Textbooks Textbooks are generally divided into seven categories: junior colleges and universities, specialized secondary schools, high schools, primary schools, part-time study, literacy training, and instructor's manuals. Table 3.10 provides an analysis of the seven categories.

In 2004, textbooks for junior colleges and universities had the most titles published. Primary school materials had the largest number of impressions and those for high schools had both the highest gross sales and the most printed sheets. Concerning the growth rate, textbooks for junior colleges and universities boasted a comparatively high growth according to all indices. Textbooks for specialized secondary schools also saw aremarkable growth in total titles, total impressions, total printed sheets, and gross sales, although new titles grew by only 1.38%. Textbooks for primary and high schools both had a high growth in total titles and new titles. Textbooks for high schools grew by 41.48% in total titles and 33.59% in new titles, while those for primary schools grew by 21.92% and 20.25% respectively. However, the growth of textbooks for primary and high schools was at a standstill or even experienced negative growth. This was due in large part to the diversification and localization of textbooks and the introduction of public bidding for textbooks. As the scope of public bidding continues to expand, there will be a higher growth in the number of titles but a dramatic drop in single-title impressions. All textbook publishers should be aware of the situation. Instructor's manuals grew by a small margin in total titles but dropped by 12.18% and 10.17% in total impressions and total printed sheets respectively. However, the gross sales for this category grew by 8.19%, indicating a comparatively high rise in the list price and sheet

price of this category. Of all the seven categories of textbooks, part-time study books attracted the most attention: they only grew by 10.38% in total titles, but increased by 52.57%, 81.82%, and 75.91% in total impressions, total printed sheets, and gross sales respectively, with the gross sales exceeding RMB 200 million. The rapid growth of this category indicates the soaring demand for part-time study books.

SUPPLY OF TEACHING SUPPLEMENTS

The supply and demand of teaching supplements in all administrative districts of China in addition to central presses from 2003 to 2004 are presented as follows.

Total, New, Republished, and Reprinted Titles The market of teaching supplements is fundamentally one of fierce competition. Compared to trade books, teaching supplements have a higher republication rate. In 2003 and 2004, the number of republished titles exceeded that of new titles.

In terms of published titles, the central presses have an advantage in the market of teaching supplements. In 2003 and 2004, the titles published by central presses accounted for 18.48% and 20.82% respectively of the country's total. In 2004, Beijing, Jiangsu, Jilin, Shandong, and Shanghai each published over 2,000 titles of teaching supplements.

Impressions, Circulation, and Stock In 2004, the impressions of teaching supplements totaled 1.407 billion copies and 1.27 billion copies were sold. Central presses were responsible for 15.62% and 14.26% respectively, with total impressions reaching nearly 220 million copies and a circulation hitting 181 million copies. In addition, Jiangsu Province had total impressions of 166 million copies and a circulation of 164 million copies. Countrywide, total impressions and circulation in 2004 decreased by 12.5% and 17.12% respectively from 2003. Compared with 2003, the total stock decreased by 11.82% in 2004. While most provinces had a decrease in stock, some saw an increase. For instance, the stock of Fujian, Zhejiang, and Yunnan grew by 492.48%, 323.29%, and 269.33% respectively.

Gross Sales, Sales Revenue, and Stock Value by List Price In 2004, the gross sales of teaching supplements amounted to RMB 11.011 billion, sales revenue RMB 7.049 billion, and the stock value by list price RMB 1.166 billion. Out of these, the gross sales of teaching supplements published by central presses was RMB 2.419 billion, sales revenue RMB 669 million, and stock value by list price RMB 341 million. Teaching supplements take a high proportion in the book market, contributing about 30% to the book publishing industry in terms of after-discount sales (ADS) and sales revenue. This is exactly why so many presses want to squeeze into the teaching supplements market.

Statistics show that since the 1980s, the printed sheets of textbooks and teaching supplements have maintained a proportion of 40-50% of all books. Therefore, a change in the impressions of textbooks will influence the growth of the book publishing industry

as a whole in view of the dependency of China's book publishing industry on textbooks. In recent years the proportion of textbooks and teaching supplements has started to decline, exerting a great impact on the whole book publishing industry in China. This unique market feature must be taken into account in the supply-demand analysis of China's book market.

STATE POLICIES AND THE SUPPLY AND DEMAND OF TEXTBOOKS AND TEACHING SUPPLEMENTS

According to the Opinions of the Office for Economic Restructuring under the State Council, of Press and Publication on Reducing the Prices of Textbooks for Primary and High Schools and Deepening the Reform of Textbook Administration System, textbooks shall be priced on the basis of the average industrial cost arising from such segments as film leasing, publication, and distribution, and a cost-profit ratio of 5%; the state price administrative departments shall fix the median price of printed sheets for textbooks and determine the per-sheet price within a range of the median price plus or minus 5%. All these mean that textbook publishers have entered a stage of meager profits.

According to Administrative Measures on Teaching Supplements for Primary and High Schools, education administrations and other departments concerned at all levels should not force schools to order any teaching supplements; primary and high schools should not organize students to purchase these materials nor should publishers solicit schools to subscribe to any materials or bundle them with subscribed textbooks. In short, the option will be left to the students themselves. In addition, the government has also started to exercize control over the total quantity of teaching supplements published, stipulating that in principle the total number of planned titles (based on ISBNs) of teaching supplements in any province, autonomous region, or municipality shall not exceed 10% of the total planned book titles (based on ISBNs) of the year, and that publishers of teaching supplements should submit their publishing plans to the GAPP for examination and approval.

In China, the supply and demand of textbooks and teaching supplements is closely related to the university entrance examination system and all policies connected therewith will influence their supply and demand. For instance, in 2004, Tianjin, Liaoning, Jiangsu, Zhejiang, Fujian, Hubei, Hunan, Guangdong, and Chongqing were granted the right after Beijing and Shanghai to design their own university entrance examination papers. As a result, the entrance examinations have since been designed and organized in a different manner. Of course, the influence of this change has also been deeply felt in the supply and demand of textbooks and teaching supplements.