Since China's reform and opening-up, its cultural market has played an important role in promoting economic development, enriching people's life and boosting socialist spiritual development in Heilongjiang Province. Up till now, the province has more than 30,000 culture industrial units, which create annual revenue of over RMB1 billion and provide hundreds of thousands of job opportunities. In respect of the cultural market, the tasks in the Tenth Five-Year Plan Period are not only to tackle old problems left from the 20th century but also to meet challenges brought about by the WTO entry. Premier Zhu Rongji pointed out in his report that we should get fully prepared for WTO challenges and do various tasks well in the transition period; take concrete measures, transform management methods and improve enterprises' competitiveness; deepen reforms to bring economic and trading system to conform with international standards; speed up emendation and improvement of related laws and regulations and foster more professional talents familiar with international practices.

China pledged to open its service trade market under the rules of the WTO and to basically fulfill it in the transition period. At the same time, the WTO provides a full set of fundamental rules of trading system and economic operation based on legislation and requires its member countries to abide by them. It emphasizes fundamental principles of national treatment, transparency, non-discrimination, fair competition and so on. Inevitably, China will have to allow foreign capitals and enterprises to engage in operation and competition on the equal footing with domestic ones.

Getting Adequate Knowledge about WTO Pressure

Cultural market is originated in market economy. Compared with other WTO member countries, China's market economy, transformed from the longstanding planned economy, calls for better market mechanism and law-abiding administrative techniques. For a long time, the Chinese government emphasized too much on administration but neglected development and guidance, resulting into the current uncompetitive market system.

After the WTO entry, cultural enterprises in China will have to compete with multinationals and the country will gradually lift non-tariff barriers, policy-based protection and national subsidies. As a result, cultural enterprises will lose props and various problems will thus become more extruding.

(1) Irrational Allocation of Production Factors

In the market economy, allocation of production factors is determined by the market mechanism. Since the market economy started late in China, its laws and regulations are still distempered. China's market economy, which is far from perfect, together with many blind investments, has led to irrational allocation of production factors. Taking the culture and entertainment sector for instance: Large entertainment places only account for 11% of the sector but their capital amount exceeds 80%. As a result, blindly invested large entertainment places suffer declining benefits and low investment return due to improper market positioning and poor management, while medium and small-sized entertainment projects cannot afford production expansion. Irrational capital allocation has choked the sector.

Technology is another important factor besides capital. In the era of knowledge boom, technological advances are critical to such technology-intensive sectors as the audiovisual sector. Low technological level -- the bottleneck in the audiovisual development -- has resulted in high cost, low quality, outdated content, unitary form and low market share of audiovisual products.

(2) Unsound Industrial Structure

Unsound industrial structure is obvious in two aspects. First, maladjustment has cropped up between import substitution and export orientation. Since audiovisual products, software and films fall into technology-intensive sectors, it is necessary to implement import substitution in the short period to make up technology gap and enrich people's spiritual life. Currently, import substitution is a common practice in international trade, but it certainly will hinder domestic industrial upgrading if practiced for a long time. The WTO bans subsidies on import substitution in its Agreements on Subsidies, and the relatively feasible strategy recognized by the economics circle is to combine the two measures together, promoting export-oriented products based on import substitution. Only in this way can enterprises improve production of audiovisual products, software design and film screening techniques and thus facilitate upgrading of the culture industry.

Second, unsound industrial structure leads to disjunction of cultural products production and distribution. New products have to go through many processes before they enter into circulation. For films, music and software products that are mostly trendy consumer goods and feature strict timing, industrial barriers set up by some departments block their circulation and thus devalue these products. In addition, creation and production are not integrated together. Taking the audiovisual market as an example: Some publishers with creation ability do not have batch production capacity while some producers with assembly lines do not possess creation ability.

(3) Unreasonable Forms of Ownership

In the cultural market there are many collectively owned units, which depend on financial lending and suffer low effects and poor efficiency. Financial fund appropriation in nature is against the WTO rules. At present, it needs further reasoning as for whether to privatize cultural enterprises and whether there is a more effective mechanism for collectively owned cultural units to adapt to market rules and compete fairly with private enterprises.

(4) Coexistence of Workshop Management and Industrial Barriers

China's culture industry, dominated by private economy, primarily follows the workshop management centered on households, which is far from modern enterprise management system. In order to survive competition and seek further development, cultural enterprises have to develop the modern marketing concept to raise their production efficiency and economic benefits. If the workshop management is regarded the internal cause of the deterred culture industry in China, then industrial barriers resulted from the longstanding planned economy are the external cause. In China, an investor has to go through numerous examination and approval procedures in order to establish a cultural unit.

(5) Presence of Many Problems

Big number: After China's reform and opening-up, cultural enterprises kept emerging like bamboo shoots after a spring rain. In only ten years, the culture industry has developed into a market system with entertainment, audiovisual, films, publications and fine arts. Incomplete statistics show that China has registered more than 30,000 cultural units.

Random distribution: In the market, commercial cultural units with a relatively big scale, such as audiovisual products wholesalers, general entertainment places and commercial performance places, somewhat cluster together, while others, such as sing and dance halls, poolrooms, audiovisual products rental shops and publication retailing outlets, are mostly scattered irregularly.

Disorder: The cultural market encompasses entertainment, audiovisual products, performances, films, publications, cultural relics and fine arts, each with several sub-categories. In Heilongjiang Province, there are more than twenty sectors with different content, nature and business scope in the cultural field. The larger number of sectors involved, the more problems emerge. Despite many efforts by competent departments, the market is still in disorder.

Small scale: The number of cultural units exceeds 240,000, 81% of which have a registered capital below RMB30,000 and office space smaller than 12 square meters. These units are scattered in different corners.

II. Adjusting Industrial Policies and Developing Comparative Advantages

1. The Comparative Advantage Theory is most widely accepted among economists and it provides a reasonable base for developing countries to adapt to the WTO legal framework.

What did the classical economist David Ricardo (1772-1823) mean when he coined the term "comparative advantage"? Suppose country A is better than country B at making automobiles, and country B is better than country A at making bread. It is obvious (the academics would say "trivial") that both would benefit if A specialized in automobiles, B specialized in bread and they traded their products. That is a case of absolute advantage.

But what if a country is bad at making everything? Will trade drive all producers out of business? The answer, according to Ricardo, is no. The reason is the principle of comparative advantage, arguably the single most powerful insight in economics. According to the principle of comparative advantage, countries A and B still stand to benefit from trading with each other even if A is better than B at making everything, both automobiles and bread. If A is much more superior at making automobiles and only slightly superior at making bread, then A should still invest resources in what it does best -- producing automobiles -- and export the product to B. B should still invest in what it does best -- making bread -- and export that product to A, even if it is not as efficient as A. Both would still benefit from the trade. A country does not have to be best at anything to gain from trade. That is comparative advantage.

2. Identifying Comparative Advantages of Chinese Culture Industry

(1) Increasing exports of cultural products with national characteristics. China is a multinational country and has many national cultural products of oriental ancient traditions. Chinese national cultural products feature a big variety, distinct national flavor and comparatively high artistic value, and the majority of them enjoy low cost since their materials are supplied locally.

(2) Increasing exports of labor-intensive cultural products. China has abundant labor resources, which are liable to create cultural products with high added value, so as to lower cost, raise economic benefits and partly make up disadvantages of capital and technology shortage.

III. Policies and Measures

(1) Government Functions

The government should first abandon compulsive instructions under the planned economy system, but this doesn't mean to practice laissez faire in the market economy. It should practice macro control through economic leverage of pricing, taxation, financing and so on.

(2) Strengthening Administration According to Law

Law-abiding administration has two connotations - legislation and improvement of law-abiding administration. The WTO is designed to ensure a fair and sound environment for international trade, and push forward development of legal system and standardization of the world economic order through a series of legal principles. China's WTO entry will surely bring about far-reaching effects on the national and local politics, economy and culture, and therefore require necessary adjustment to the existing administrative laws and regulations. Relevant authorities should focus more attention on legality, relevance and efficiency in regard to concrete administration procedures such as approval, licensing, registration, certificate issuance and charging of domestic and foreign cultural units.

(3) Suggestions on Improving Cultural Units' Competitiveness

Suggestion One: Accelerating ownership reform of collectively owned cultural units. Since long ago, people have got accustomed to regarding culture as a nonprofit business that is invested by the government and provides welfare to the public, leading to emergence of many collectively owned cultural units. These units did play a big role in enriching people's cultural life and boosting socialistic civilization in a certain period, but the old system can no longer meet the booming economic development. Ownership reform becomes an urgent task.

Suggestion Two: Taking concrete measures and promoting culture industry upgrading. In this perspective, several measures can be taken into account. The first one is to direct capital investments through financing, pricing, taxation and discount lending policies, improve financing capacity of large culture and entertainment enterprises, and simultaneously encourage small and medium-sized enterprises to expand production. The second measure is to launch favorable policies promoting chain operation of cultural businesses. This measure is especially good for the audiovisual sector because chain operation can elevate production capacity, raise production efficiency, improve distribution system, lower distribution cost, speed up industrial upgrading and finally form economy of scale in the sector. The third measure is to set up several awarding systems to advocate technological renovations.

In addition, cultural units should change their marketing concepts, improve their managing levels, and establish a managing pattern compliant with the modern enterprise system so as to seek development amid competition.

IV. Conclusion

The culture industry has been internationally recognized as a "sunrise industry" and has a huge market potential. Cultural businesses enjoy advantages of high flexibility and low investment risks and are easily geared to demand of ordinary consumers. It is not difficult for a cultural enterprise that can adjust its operation strategies and raise its managing level in good time to survive the international competition.

It is safe to say that the WTO entry will bring both opportunities and challenges to China. On the one hand, funds and technologies of multinational entertainment companies will undoubtedly breathe a new life into China's culture industry and make the market more prosperous. On the other hand, domestic culture and entertainment enterprises, and culture administrative authorities at all levels will get some attacks. The primary task at present is to grasp every opportunity, adjust policies and reasonably establish comparative advantages.

(Source: the Marketing Section of the Heilongjiang Cultural Department)