Government Departments to Shed Publishing Houses in Shake Up

Translated by Liu Peng
News, page 4, Issue 423
Original article: [Chinese]

Eighty publishing houses currently affiliated with various ministries and commissions of the Chinese central government are slated to be corporatized by the end of 2009, according to China's national media and publishing regulating body.

The move is part of a larger plan by the General Administration of Press and Publication (GAPP) to shed 148 of these Beijing-based publishing houses over the next two years.

It's also part of a broader restructuring of cultural industries that is taking place in China, and it's only because of the political sensitivity of meddling with these central-government-affiliated publishers, that they have been able to avoid the restructuring that has already taken place in the regional and university publishing industries.

The publishers approach the reform with different views, some, especially the more competitive and profitable presses, look forward to it, most don't care, a small minority are?opposed to?reform.

The total assets locked-up in these official publishing houses amounts to approximately 100 billion yuan. However, it remains unclear who will be in control of these assets after the reforms are completed.

Resistance to the Shake Up
At present, the Publicity Department of the Communist Party of China Central Committee and GAPP are organizing training programs for the heads of the Beijing-based publishing houses involved in the plan.

During the reform, six or seven giant publishing groups devoted to broad areas such as education, science and technology, economics and health care will be established from the publishers.

The Economic Observer learned that two publishing houses attached to the Ministry of Human Resources and Social Security - China Labor and Social Security Publishing House and China Personnel Publishing House - and the China Financial Publishing House, which is subordinate to the People's Bank of China, were included in the first batch of publishing house that will undergo restructuring.

The plan is, that in keeping with the principles of reform, publishing houses which are currently subordinate to government departments and which often serve as convenient repositories for semi-legal funds, would, through restructuring, mergers and other measures, gradually evolve into competitive participants in the market economy.

The EO learned that some ministries and commissions were in the habit of transferring any unspent funds that they had received to their subordinate publishing houses under the premise of publishing costs. Instead, the money became a slush fund of sorts for the ministries and commissions and they saved up huge amounts that were used to fund the social spending obligations of the unit.

"Some publishing houses have become "small gold storage ponds" to the ministry or commission above them, and are used to fund handouts and bonuses to the ministry's workers," said Liu Binjie, director of GAPP in an interview with state media CCTV.

He candidly went on to admit that "some ministerial chiefs asked me to first find a solution to this problem before cutting off the source of their company's bonuses."

Another barrier to reforming the system according to Zhu Shanbo, president of Tacter Consulting Company and long term observer of reform in the publishing industry, is that "these publishing houses have a strict system of administrative ranking. In order to promote some cadres, the ministries would often transfer them to a position of higher government ranking in these publishing houses." His comments point to concerns among some ministries and commissions that the reforms would remove the additional space for promotion they currently have in?terms of being able to offer?staff positions in their subordinate publishing houses.

He went on to add that even if the reform would result in publishing houses being more vigorous and competitive, some officials, especially those occupying key positions, were not willing to support the changes.

Will the Reforms Go All the Way?
Given these barriers to reform, many commentators are concerned that the restructuring will not be completed.

Already, according to an EO source, the central government has been forced to compromise on the issue of institutional separation of the publishing houses from their controlling ministry or commission.

Despite the State Council requiring ministries and commissions to separate their main administrative functions, such as finance and personnel, from the publishing houses, some publishers are being allowed to "temporarily not separate."

According to the same source, "the temporary relaxation of the separation rules is being adopted to quicken the pace of reform, otherwise it would be impossible to move forward."

Other Problems Faced by the Reform
Among the problems associated with the restructuring, the problem in most urgent need of a solution is, who will be responsible for these state-owned publishing conglomerates and who will regulate their state-owned assets.

Analysts believed that given the small scale of the assets involved and also the high pressure on maintaining and increasing the asset-value of these publishing houses, it was unlikely that the State-owned Assets Supervision and Administration Commission (SASAC), the country's state-owned assets watchdog, would take over.

The EO learned that policymakers were considering a proposal that would allow the Central Propaganda Department to take charge of the publishing groups on behalf of SASAC.

Wang Bo, president of China Logistics Publishing House, held that large publishing groups, state-owned companies and other market entities could also play a part in the restructuring process.

"Private capital is interested in publishing house reform," said Zhu Shanbo. He believed that if private capital was allowed to enter into the publishing sector, the industry would boom.

To help ease the introduction of the reforms, various central government departments will enact favorable policy measures. For instance, corporatized publishing houses will be exempt from paying corporate income tax, housing tax, value-added tax and tax on imports and exports.

But these measures only cover the minimal associated costs of reform. It still remains unclear who will be burdened with the other more substantial costs of reform, including pension funds and other human resources costs associated with civil servants becoming regular employees.

The EO learned the cost of corporatizing publishing houses is likely to be quite expensive, as can be seen in the experience of restructuring the regional publishing houses, when costs sometimes climbed into the hundreds of millions of yuan.