According to the commitment concerning the accession into the Chinese cultural market made by China for its entry into the WTO, China will permit foreign capital to engage in such business as wholesale, retail and lease of audio-visual products. The administrative regulations will enter into force as from January 10, 2002 and this is to mean that China has already honored its commitment in this respect.

In line with the regulations, foreign enterprises and other economic bodies or individuals may, on the principle of equality and mutual benefit and with the approval of the Chinese governmental departments concerned, establish enterprises together with Chinese enterprises or other economic entities to engage in a form of cooperation in such business as wholesale, retail and lease of audio-visual products in China, including dubbed audio-tapes, video-tapes, gramophone records and laser discs and laser visual discs, etc.

The Chinese partner who is going to apply for establishing a cooperative distribution enterprise of audio-visual products with his foreign cooperator is required to have no illegal record during three years prior to his submit-in of the application. The Chinese and alien cooperative enterprise for distributing the audio-visual products should be set up in conformity with the following conditions: having the status of a legal persona; having the conditions for establishing a distributive enterprise of audio-visual products and having eligible capital to cater to the business scale. The Chinese cooperator should hold rights and interests of no less than 51 percent in a suchlike enterprise with its term of cooperation not to exceed 15 years.

As required by the regulations, such Chinese and foreign cooperative enterprises should be subject to and accept supervision and administration of relevant departments in line with the state regulations concerning the foreign invested enterprises while their lawful business activities, and rights and interests of the cooperative partners shall be protected by the state laws. However, they are not permitted to engage in dissemination and distribution of products prohibited by the state; not allowed to do such business as distributing the products published or copied by non-audio-visual publication or copying units; not allowed to engage in importation of such audio-visual products unapproved by cultural units; and neither such products as to violate other persons' copyrights nor the import business of suchlike products are allowed.

To establish a Chinese-foreign cooperative enterprise engaging in distribution of audio-visual products, the Chinese partner must apply according to procedure to the Ministry of Culture for filing first, and then to the MOFTEC for approved foreign investment certificate, and afterwards to get from the Ministry of Culture the license for business operation.

Enterprises engaged in distributing audio-visual products set up unauthorized by the Ministry of Culture and the MOFTEC or those using foreign capital by this or that means without authorization to do suchlike business shall be punished in line with the regulations by relevant state departments with responsibilities entailed therefrom to be borne by the person in charge.

(People's Daily December 26, 2001)