PRIVATE bookstores were allocated a hall of their own at the 2004 Shanghai Book Fair which ended last Monday.

The fair, which started on July 28, featured State-owned Xinhua Bookstores as well as leading local publishers. The private store section occupied a humble hall at the very back of the Shanghai Exhibition Centre, with each booth taking up no more than 10 square metres of space.

But the 60 private book stores were appearing in the Shanghai Book Exhibition for the first time, marking a new level in the prosperous emergence of private book businesses.

A growing presence

A report on the development of private book enterprises in China reviewed the history as well as the significance of this phenomenon for the book industry.

The report was produced by the Chinese Publication Scientific Institution (CPSI) last year. It showed that up to 2002, China had 78,000 private bookstores.

China's national State-owned book store network - Xinhua Bookstores - has been monopolizing the sale of formal textbooks and other educational books in general. But leaving this part of the market aside, private bookstores now account for about 50 per cent of book sales nationwide.

Hao Zhensheng, vice superintendent of the CPSI, said clear-cut property rights were the greatest advantage enjoyed by private book enterprises, stimulating them to seek high efficiency and profitable operations.

The report also showed that some leading private book companies had entered the publication industry, which had long been dominated by State-owned publishing companies.

High efficiency

Yu Ming, who was in charge of producing this report, said private book enterprises are involved in every aspect of the book industry, from the choice of subject matter, to book design and consultation services as well as sales.

"My bookstore provides a space for direct communication between authors and readers and also a base for my planned projects. I think that's my greatest success," said Ming Jun, general manager of a book network containing 19 stores, most scattered around the Meto Line Two stations.

Private book industries like Mingjun, Jifeng and Scholar buy International Standard Book Numbers (ISBN) from State-owned publishing houses, which give them governmental permission for the publication of a book. But the editing, designing, distribution and sales are all left to the private companies themselves.

"Many publishing houses want to co-operate with us," said Shan Yan, deputy manager of Mingjun Bookstore. "Especially since we have so many chain stores, we can quickly figure out what kind of books are demanded urgently by the market," she added.

Ming Jun said that her final aim was to engage in independent publication, although this was not possible at present because of legal restrictions. "But we truly have a successful business," she said. She had published a set of six books on old Shanghai scenes which became an instant success. "I am confident the we can accomplish our goals and book publication will eventually be opened to private enterprises, perhaps within two to three years," she said.

Scholar Bookstore is a joint venture company with half State-owned investment and half private capital. According to He Genxiang, manager of Scholar Bookstore, the company had a stronger financial base than most private bookstores while enjoying a more flexible management system than Xinhua Bookstores. Scholar's State-owned investment came from the Shanghai Century Publishing Group (SCPG), which also provided strong publishing support.

Heavy taxation

But other private bookstores may not enjoy such a favourable situation. Jifeng, a private bookstore chain with eight branches in Shanghai, found it difficult to cope with heavy taxation, unequal competition with State-owned bookstores and policy restrictions.

"The prosperity of private bookstores may just be superficial," said the general manager of Jifeng, Yan Bofei, a former researcher at Shanghai Academy of Social Sciences. Private stores sale-volumes can in no way compete with those of the Xinhua network. The sales volume attributed to the private stores actually includes newspaper and magazine vending businesses.

This superficial prosperity may benefit some speculators in the short term, when publishers, eager to sell their products, are willing to supply goods without receiving timely payment.

Xu Xinhai, an office secretary from Xinhua Bookstore, said that private business didn't constitute a significant challenge to them. If there was an advantage on the part of private bookstores, it was their flexible price system. "If there is a challenge, it should be called a price war," he said.

Some private bookstores offer 20 per cent or higher discount for customers, but they may be indebted to their suppliers. "Some bookstores have acquired a bad reputation in this aspect," Yan said. "Publishers are becoming unwilling to supply books to them."

It would probably only be a few months, Yan warned, before the problem of bad debts in the private book industry appeared on a large scale, seriously shaking the industry.

Yu said private book enterprises in Shanghai - including Jifeng, were not very competitive and were trying to maintain their business with slender margins. Xu acknowledged that Xinhua Bookstore made a large profit based on its monopoly on teaching materials.

"All I can say is that Jifeng is operating with a healthy financial balance, and the publishing section is going quite well," Yan said. "I would like to have a 100-year-old little bookstore with character. It could be passed on from generation by generation. That would bring great happiness."