Recent Development in Chinese Laws On Foreign Investment in Areas of Television, Movie and Publishing

By R. Z. Margaret Lu
[May 2003]

To prepare for, and follow China's accession to the World Trade Organization (WTO) in December 2001, the Chinese government published a large number of laws and regulations to relax prior restrictions on foreign direct investment in, among others, the areas of television, movie theater and publishing. The following are a few examples of such new laws and regulations:

• Interim Regulations on Foreign Invested Movie Theaters, published by the State Administration of Broadcasting, Movie and Television and the Ministry of Foreign Trade and Economic Cooperation on Dec. 25, 2000 (Movie Theater Regulations)
  
  
• Interim Measures Concerning the Examination, Approval and Regulation of Transmission of Foreign Satellite Television Channels in China, published by the State Administration of Broadcasting, Movies and Television, effective Feb. 2, 2002 (Satellite Television Regulations)
  
  
• Measures Concerning Regulation of Foreign Invested Distribution Businesses for Books, Newspaper and Magazines, published by the News Publishing Agency of the People's Republic of China and the Ministry of Foreign Trade and Economic Cooperation, effective May 1, 2003 (Book Distribution Regulations)
  

These new laws and regulations exemplify China's effort and commitment to become a qualified member of WTO, but they still contain restrictions in many aspects. For instance, content restrictions imposed by the Chinese government to television, movie and publishing areas have an impact on almost all foreign investment projects in those areas. The Movie Theater Regulations and Satellite Television Regulations maintain restrictions on majority equity ownership by foreign investors; and foreign invested movie theaters in China are not allowed to use or bear the name of any foreign movie industries or media, or the name of any foreign movie theater chains. Foreign investment in publishing books, newspapers and magazines in China is still prohibited, but the distribution of books, newspapers and magazines is open for foreign investment. Pursuant to the Book Distribution Regulations, foreign investors are allowed to hold 100 percent equity ownership of book, newspaper and magazine distribution businesses in China now.

Be it a green field project or a merger and acquisition, the establishment of a foreign invested operation in China requires examination and approval by the responsible branches of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), whereas the establishment of a foreign invested operation in the area of media, movie or television requires examination and approval not only by MOFTEC but also by the government authorities responsible for the particular industry such as the State Administration of Broadcasting, Movie and Television. In an effort to eliminate different treatment of foreign invested companies and domestically owned companies in China, the Chinese government recently merged MOFTEC and certain divisions of its counter-part responsible for licensing and regulating domestic companies in China into a new Ministry of Commerce (MOC) in a government organization restructuring process. Even though the restructuring may not take away the need for "double" approval for foreign investment projects in the television, movie and publishing businesses, once over the initial hurdles of restructuring chaos, MOC will play an important role in the promotion of foreign investment in China by offering a "one-stop" approval process.

About DWT
Being the first U.S. law firm to obtain approval from the Ministry of Justice to set up a representative office in Shanghai, China, we have extensive experience in assisting U.S. companies in their investment projects in China. Depending on your business needs and applicable legal and investment environment in China, we can provide:

• Legal analysis for investment and management structure
• Legal due diligence
• Document preparation in English and Chinese
• Contract negotiation
• Licensing agreements and other agreements for intellectual properties such as trademarks, brand names, technology and software
• Advice on approval procedures and related matters
• Advice and documentation of employment related matters for your operation in China, including employment contracts, non-compete, non-solicitation and confidentiality agreements
• Legal compliance matters for your operation in China, such as taxation, social benefits and insurance and other statutory requirements
• Legal training for Foreign Corrupt Practices Act regarding its impact on China operations of U.S. companies

Published by DWT's China Practice Group

If you have any questions or would like to discuss the implications of this Advisory Bulletin in more detail, contact the author, R. Z. Margaret Lu, margaretlu@dwt.com, or your usual DWT attorney.

For further information, please contact:

R. Z. Margaret Lu (Author), New York, (212) 603-6447, margaretlu@dwt.com
J. H. Jerry Zhu, New York, (212) 603-6458, jerryzhu@dwt.com
RongWei (Ron) Cai, Shanghai, (011) 8621-6279-8541, roncai@dwt.com
Allen D. Clark, Seattle, (206) 628-7630, alclark@dwt.com
Norman B. Page, Seattle, (206) 628-7740, normpage@dwt.com
Zhi-Yin James Fang, Los Angeles, (213) 633-6847, jimfang@dwt.com
James M. Mei, Portland, (503) 778-5315, jimmei@dwt.com
Ronald K. Ragen, Portland, (503) 778-5301, ronaldragen@dwt.com

This China Practice Advisory is a publication of the China Practice/Shanghai Office of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent legal developments in China. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2003, Davis Wright Tremaine LLP.

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