China's culture industry has entered an important historical period in the new century. The Tenth Five-Year Plan adopted by the Fifth Plenum the Fifteenth CPC Central Committee pointed out: the State shall promote the combination between the IT industry and other culture-related industries, improve its policies on the culture industry, enhance the culture market construction and management and push forward culture-related industries in the period of Tenth Five-Year Plan. It shows clearly the development orientation for China's culture industry and the official decision to actively develop the culture industry.

It is significant to analyze what challenges China's culture industry will encounter in the new century. In the writer's point of view, the industry will meet challenges in three aspects - challenges on Chinese way of thinking, on the culture industry and on the current management and operation mechanisms in the industry.

-- Changing Conception and Getting Ready for Challenges

"The culture industry" mentioned in the resolution of the Fifth Plenum the Fifteenth CPC Central Committee is not just a matter of concept, but a matter of theory, i.e. a matter of whether to recognize the economic nature of culture. If we run back over the history since the Third Plenum of the Eleventh CPC Central Committee, we'll find that it was a process to recognize the significance of culture in the national economy and a process to go from whether culture has the same nature as merchandises to whether culture can enter the market, to culture undertaking can well integrate social benefits and economic benefits under the premise of giving priority to social benefits, and finally to the development of culture-related industries. From the perspective of recognition, this was a gradual process and also a process of gradual deepening in understanding. From the perspective of practice, this was an inevitable result of China's culture industry development.

As for whether culture is a part of GDP, there remain several different opinions. Some people think that since culture is the upper construction and falls into the domain of ideology, it is impossible to serve as an economic foundation or a part of the national economy. Certainly, culture bears the nature of ideology, and exerts some subtle influences on the people's view, philosophy, value judgment and judgment of morality. This function of culture does not take effect just after someone reads a book, sees a film or watches a play but happens in a certain cultural environment through long-term influence. What China is now developing is the socialist market economy with Chinese characteristics, and it requires the domain of culture and ideology to be dominated by the socialist way of thinking, morality and culture. To this end, what kinds of cultural products or services should provide to the society? There is only one answer -- cultural products or services (or called market) must be acceptable by the masses. We often say that we should give top priority to social benefits, and integrate social benefits and economic benefits. In general, social benefits refer to the function of being good not harm to the social development and promoting a healthy development of the society. The ultimate realization of social benefits relies on economic benefits. For instance, for a book, a film or a play, the more readers or audiences, the stronger social reaction, then the higher economic benefits and finally the higher social benefits. Some people might question this conclusion by saying: "If economic benefits equal to social benefits, can we say that vulgar or even pornographic products with economic benefits have social benefits?" The answer is of course "No!" First, in respect of product sources, real art creators pursue the biggest success in arts and there are no well-known artists who got fame from vulgar or even pornographic works in the world. Second, in respect of art production process, what art production pursues, just like other production, is social benefit maximization, i.e. market maximization or economic benefit maximization. Third, in respect of market demands, there is a market for vulgar or even pornographic products and services, but the market is impossible to become the mainstream in any country, even in capitalist countries. Demand in the mainstream market of any country exists with positive and healthy products and services, or the human society and human civilization can never develop and advance. Finally, in respect of the objective of China's legislation, the Constitute and other related laws and regulations distinctly ban products that are against the Party, the socialism or the socialist civilization construction. In view of this, China should let artists have more freedom to create more and better products with better economic benefits for the society.

From the perspective of conception, this is a real challenge since we have to let go of the intrinsic ways of thinking and change the function of culture from "entertaining people through education" to "enlightening people through entertainment". At the same time, we should change the old management mode of cultural arts and create a freer and more pleasant environment for art creation and production. This doesn't mean to cancel or weaken the Party's leadership in the work relating cultural arts, but to make art creation and production more market-oriented.

WTO Opportunities and Challenges for the Culture Industry

Entering the WTO will bring about both great opportunities and challenges to China. Industries such as finance and insurance, information and communications, traditional agriculture and automobile have all felt the pinch and are pondering solutions and preparing for the entry. While in the culture industry, many people are not aware of the challenges yet mainly due to the above-mentioned old way of thinking. A lot of people think that the culture and arts belong to the ideological domain, are tools for propaganda and public opinion guidance protected by the Party and the government and are managed according to the planned economy, so China's WTO entry will have some impacts on the economy but not on the culture and arts.

However, people with this view have not realized that various cultural thoughts and products have flooded into Chinese culture market through legitimate or illegitimate channels when China introduce or absorb foreign refined cultures. Western capital has long eyed China and is trying to enter this vast market. In the music market, nearly all disc studios with which domestic pop singers have signed agreements have involvement of foreign capital. Just after the Sino-US bilateral negotiation, Hollywood movie studios could not wait any longer to enter Chinese market. They secretly began to collect information about China's movie consumption market and bought Chinese movies for in-depth analyses.

Some advanced capitalist countries try to penetrate other countries culturally. Taking the United States for an example, it employs traditional cultural carriers such as movies, books, sports clothes, food and drinks, and high-tech cultural carriers such as computer software, Internet and satellite transmission for cultural penetration; people in Europe, Asia, North America, South America, Oceania or Africa all feel the existence of American culture in daily life or work. Cultural penetration not only brings high profits for the United States but also helps realize some political goals that cannot be reached by other means.

Therefore, it is safe to conclude that challenges brought about by China's WTO entry are not simply economical but more importantly political.

As for countermeasures, resisting foreign cultures is not the most effective way because high-tech such as the Internet has greatly facilitated the transmission of cultures.

Some people said that as far as culture is concerned, the WTO entry brings about neither opportunities nor challenges. If China's culture was one under the planned economic system, then the saying held water. However, the fact is that China has set up the socialist market economic system and Chinese culture has entered the market. Therefore, the WTO entry brings about both opportunities and challenges. The biggest opportunity is that it pushes forward reform and opening up in the culture industry. At present, the country's cultural development is out of line with economic development because of insufficient investment and relatively slow pace in cultural reforms. After the WTO entry, the close management mode of many culture-related industries that exclude private capital and even State capital, and are solely taken care of by the governments will gradually become more open and assimilate multi-ownership investments. When multi-ownership investments are introduced, China's cultural market will see stiffer competition. If the existing cultural units do not further reform themselves and step up industrialization, it will be just a matter of time for them to be phased out of the market. Therefore, in-depth reform and further opening up is the fundamental drive for the development of China's culture industry.

After China enters the WTO, the greatest challenge is how Chinese enterprises and cultural products and services face attacks from foreign capital and products.

In China, there are more than 400,000 enterprises in cultural production and service fields, which employ about 2 million people. Though the number is not small, the quality is quite low. In China, the biggest cultural group only has several hundreds of millions of RMB in its registered capital, and the groups with largest sales only have about RMB20 billion in sales revenues. While in January 2000, Time Warner agreed to be acquired by AOL with a price of US$163 billion, and the market value of the merged company reached US$360 billion and its annual sales exceeded US$30 billion.

China's cultural products developed very swiftly in terms of quantity after the reform and opening up. In 1999, newly staged items of art performances reached 4,500, more than 14,000 books were published, and over 18,000 types of audiovisual products that totaled 178 million discs (copies) came out. However, the quality is not high in terms of artistic, technical, high-tech and capital input. For instance, performance market is sluggish, ticket office revenue mainly comes from foreign blockbuster movies, audiovisual market is plagued by piracy and infringement, and so on.

Objectively speaking, China's cultural market has great potential and the challenges and opportunities in the industry after China's WTO entry are not second to those in industries such as finance and IT.

New Century: What Challenges Will the Culture Industry Face?

For a long time, culture has been managed as a part of ideology according to the mode of the planned economy. The government is responsible for everything ranging from investment in cultural infrastructure to management of human resources, fund and property. What's more, the government has examination and supervision functions on products and services provided by cultural units. Cultural units have little independent management and operation rights. Though in the market, they do not participate in the market competition and are called as institutions but managed like enterprises. In a word, cultural units remain under strict control of government departments.

Since the reform and opening up, China has been deepening its reforms on economic sectors and systems, seeking the development based on innovations of mechanisms and sum-up of experience. Introduction of foreign scientific management methods, advanced technology and capital has breathed new life into China's economy and helped maintained strong growth momentum. However, in terms of culture, though "reform" has been a hot topic in the field and has been carried out, the achievements in the more than 10 years of reform have not reached the projection yet. The number of performances in the art performance sector dropped from 740,000 in 1985 to the 420,000 at present, while the outlay input by the government rose from RMB200 million when China first implemented the reform and opening-up policy to RMB1.6 billion, outlay self-support rate of art troupes declined to 33.2% from 41.4%, art performances staged in art performance places dropped from more than 290,000 to just over 70,000, and annual film output dropped from about 150 to about 80. Some film studios seldom produced films that won wide applauses and drew a large audience, leading to a declining film market at home. Some reports said that in 1989, China had a film audience of 29.3 billion person-times and created a ticket office revenue of RMB2.7 billion, while in 1999, the two figures dropped to less than300 million and RMB810 million respectively. The majority of audiovisual publishing units enjoyed small capital and just maintained a living on their business. In 1998, 40% audiovisual publishing units were in red and most publishing units suffered low economic profits and competitiveness.

The existence of problems doesn't mean to deny achievements of cultural reform but we also need to the sticking point of these problems. For many years, reform in the cultural field has been carried out in two aspects: employment and revenue distribution. In terms of employment, the reform took the hiring system as the major content, and primarily broke the employment system of the Iron Bowl and lifelong careers; in terms of revenue distribution, the reform discarded the equal revenue allocation system. Both reforms have certain effects on both cultural units and working staff, building up their awareness of crisis and improving their working enthusiasm. However, the reforms were carried out under the fixed policies of relevant authorities, were impossible to make any breakthrough. The key reason is that these reforms haven't solved the fundamental problems, i.e. problems in systems and mechanisms.

In terms of systems, the management system is the essential part and it faces three controversies: whether to manage culture as ideology or manage part of it according to requirements of the market economy; whether the government should manage culture in accordance with the uniform goals of cultural market or divide it and rule it as we do at present; whether the government should sever relation with those cultural units able to enter market competition and supervise them through macro control or partly retain connection with these cultural units and supervise them through micro control. Due to problems in systems, cultural units are not market-oriented and on a small scale, have large numbers but low quality, and spread around. Insufficient investment and repeated investment, disperse capital and low capital efficiency coexist, pursuance of departments' interests and local protection amalgamate with each other, leading to difficulty in forming resultant force and low intensive development. As a result, cultural development cannot meet people's increasing demand, while many cultural resources lay idle and have low utilization efficiency.

If these problems are not solved, the relation between the government and cultural units cannot be streamlined in the market economy. At present, the government interferes too much in the operation of cultural units. Therefore, reform on government functions is on the high agenda. In order to enable cultural units to participate market competition, the government should first completely break away the notion that cultural units are owned by certain departments and local governments, take the overall situation into consideration and form the concept of developing culture industry of the whole society. Second, during the transition period of systems, the government should employ administrative measures to push forward optimization of cultural resources allocation. Third, the government should take the initiative to amend laws, regulations and policies against the market economy and the WTO agreements, lower threshold for social capital to enter the culture industry and form a multi-ownership competition pattern. Fourth, the government should create a favorable market environment, establish complete cultural market rules, provide information service for units in the culture industry, and guide cultural development not simply with administrative measures but with legislation and policies. Fifth, the government should entirely sever the tie with cultural units so as to transform the government's functions and activate enthusiasm of cultural units, set free their production force.

Only after the problems in the systems are solved can problems in mechanisms be solved with effective measures. As for cultural units, in order to adapt to the market economy, they should solve problems related to the financing and investment mechanism, production mechanism, marketing mechanism and allocation mechanism. Among all, the financing and investment mechanism involves whether the government allow external capital (including social capital and foreign capital) to enter the culture industry, how the threshold will be lowered and whether adjusted policies will attract these capitals. It has proved that cultural development cannot meet the market demand if simply depending on government investment. The fundamental cause for the booming entertainment market in a short period was that China opened its entertainment market. Therefore, reform in the financing and investment mechanism will bring about a fundamental change. After external capital is allowed to enter the culture industry, cultural units correspondingly have to establish production and operation mechanisms adaptable to the market economy in accordance with the modern enterprise system and will gradually improve cultural units' production, marketing and distribution mechanisms during the process.

After China joins the WTO, further opening up of the culture industry is just a matter of time and a matter of open degree, but it will certainly bring about huge challenges for the current cultural management and operation systems and these challenges are greater than those for cultural units.

After entering the new century, we face more development opportunities for China's culture industry. In face of challenges, we should have the confidence to turn challenges into opportunities and drive for development and greatly boost China's culture industry.