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Book Distribution in the Chinese Mainland

5 Book Distribution in the Chinese Mainland

A. Overview

B. Different Book Sales Outlets

A. Overview

The Chinese mainland’s publication distribution market consists of four segments: books, magazines, newspapers and audio/ video/electronic publications. If newspapers and electronic publications are excluded, books, magazines and audio-video publications have a total market of RMB95.6 billion. Books have a total market of RMB43.5 billion (US$5.24 billion), magazines (subscription and advertising) have a market of RMB17.25 billion (US$2.08 billion), and audio and video publications have a market of RMB20 billion (US$2.41 billion).

At present, the distribution of publications has not been entirely commercialized and there is a lack of a national distribution network and publication distribution is mostly regional with the retail market primarily based in big cities. Books, magazines, newspapers, and audio and video publications all lack national, modern, full-service distribution networks and that has limited potential sales. All market segments have their own distinctive retail sales models and distribution channels.

Sales of publications differ greatly between urban and rural areas, and also among the different regions. City residents are the primary consumer group, especially for books and magazines. The publication consumption per capita in major cities such as Beijing, Shanghai, Guangzhou, and Shenzhen far exceeds the levels of all other regions. About 400 million urban residents buy approximately 70% of all books and magazines. At present, publication sales are mainly concentrated on the developed coastal regions of Eastern China. In contrast, midwestern China accounts for a small percentage of the overall sales. Beijing, Guangdong, Jiangsu, and Shanghai are the largest markets. The sales outlets for books and periodicals are densely concentrated in the eastern provinces. Outlets become less concentrated in central China and are sparse in the western regions. Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Hunan, Shandong, Shaanxi, Hebei, and Anhui are the 10 provinces and regions where bookstores are most densely concentrated. (See Figure 5.1.)

1. The Book Market

In 2002, total book sales topped RMB43.49 billion (US$5.24 billion) in revenue and 7.027 billion copies sold. Among book categories, textbooks held the largest market share. Sales of textbooks for high schools and elementary schools reached RMB17 billion (US$2.05 billion), representing 39.5% of total. If textbooks for colleges and vocational schools are included, total sales of textbooks exceeded RMB20 billion (US$2.41 billion). This means that textbooks take up nearly half of the book market. Non-textbook book sales were about RMB23.4 billion (US$2.82 billion), accounting for 53.5% of total sales. Books on culture and education held the second largest market share after textbooks and sales totaled RMB11.1 billion (US$1.35 billion), accounting for 25.6% of the total. Other large book categories were the natural sciences with sales of RMB2.36 billion (US$284.34 million), the social sciences with sales of RMB3.20 billion (US$385.54 million), literature and art titles with sales of RMB2.35 billion (US$283.13 million), and children’s books with sales of RMB1.46 billion (US$175.90 million). (See Figure 5.2.)

Urban residents are the main consumers of books with rural consumption levels far lower. In 2002, the consumption of books per capita in the Chinese mainland was RMB33.86 (US$4.08) with 5.5 copies purchased per person. On the retail level, the ratio of urban to rural consumption was 3 to 1. That is to say, 400 million urban residents bought RMB32.62 billion (US$3.93 billion) worth of books, while 900 million rural

residents bought only RMB10.87 billion (US$1.31 billion) worth of books. The city residents purchased three times as much as those in the country. On a personal level, in one year a city consumer spent on average RMB82 on books, while a rural resident only RMB12.10. A city consumer spent 6.7 times as much on books as a rural consumer.

Books are sold through bookstores, schools, post offices, the Internet, wholesalers, and special outlets. Direct sales are rare. Among all the distribution channels, bookstores are the mainstay of book sales. The most common distribution flow is from wholesalers to retailers. Publishers sell their books to regional wholesalers, who then resell the books to various bookstores. At present, there is no national distributor and the majority of distributors are regional and distribute books within the confines of their respective provinces. Publishers also supply books direct to large bookstores, especially to superstores.

Textbooks for elementary schools, high schools, colleges and vocation schools are all sold through the schools. Most educational publishers sell to schools directly but publishers also sell college textbooks to students through 80 college bookstores. Postal sales and online sales also hold some market share and online book sales are growing steadily. Special outlets handle books purchases by companies.

Direct book sales is still in its nascent stages. A few private booksellers and joint ventures have tried to enter into direct sales but have had little success. In the late 1990s, some companies such as the Bright Prospect Culture Development Ltd. went into direct sales.

Sales from publishers and wholesalers are classified into “consignment sales,” “firm sales” and “hybrid sales,” based on the terms of book return and payment. For consignment sales, publishers automatically supply books to wholesalers, who will pay for the books that have been sold and return those unsold copies up to a number mutually agreed upon. For firm sales, publishers supply books to the wholesalers according to their mutually agreed number. Wholesalers will pay the publishers according to the dates specified on their contracts and keep the unsold copies. Under many circumstances, a wholesaler gets exclusive distribution rights of a title in exchange for firm sales (known as primary or exclusive wholesale). Hybrid sales are the combination of consignment and firm sales. Generally speaking, a wholesaler submits its firm order to a publisher, who will supply accordingly and then provide additional quantities as demanded. For the firm order component, the wholesaler will handle payment and returns according to the agreement with the publisher. For the extra copies supplied by the publisher, the wholesaler will treat them as consignment sales.

Presently, most deals between publishers and wholesalers are either consignment or hybrid sales. Of course, trade publishers will handle consignment, firm, or hybrid sales differently from educational publishers. The same is true with different types of books. Most publishers offer a wholesale discount of between 35% and 45%. The wholesale discount can be as high as 55% and sometimes a 70% discount is also possible.

Among publishers, distributors, and retailers, publishers bear most of the risk. Under most circumstances, booksellers can get the books first and pay later. The distribution market is not standardized and there is a wide array of credit terms. Some booksellers and distributors do not pay on time, deliberately delay payment, or even default on payment. All the potential risk is ultimately borne by the publishers. Sometimes, publishers also breach distribution agreements, especially when they have a super bestseller (nicknamed a “fast book”). Publishers will ignore the exclusive distribution contract with the regional distributor and supply the same book to other distributors in the region.

2. The Magazine Market

In 2002, total revenues of the magazine sector reached RMB12.35 billion (US$1.49 billion), this includes both retail sales revenue and revenue from advertisements. As there were no accurate statistics on subscription prices, we must go by the average magazine cover price. In 2002, over 2.951 billion copies of magazines were printed in the Chinese mainland. The average cover price per copy was RMB4.97. According to this price, total sales of magazines were RMB14.67 billion and the advertising revenue was RMB2.65 billion. (See Chapter 3 on Magazine Publishing.)

Magazine distribution differs substantially from book distribution. The primary magazine wholesalers are the national postal system, in-house distribution departments, and professional magazine distributors. Most magazines use the first two. There are only a limited number of specialized magazine distributors who are capable of just regional distribution.

In the past, the overwhelming majority of magazines used postal distribution and this is still true today. The postal distribution network (called the China Post) covers the entire nation. The China Post not only handles physical distribution, but also the flow of cash and information of the regional wholesale and retail trade. After receiving the distribution authorization from a magazine, it will seek subscriptions and distribute the magazine through its national post office network. China Post handles readers’ payment for the subscriptions and after a holding period, it passes the payment on to the magazine after deducting a 40% commission fee based on the cover or subscription price.

In 2002, China Post had a nationwide network of 82,000 post offices and 240 regional postal bureaus. China Post recorded an annual revenue of RMB50 billion (US$6.02 billion). The average revenue per employee was RMB100,000. In addition, China Post also offers postal savings and remittance services and currently has about RMB400 billion (US$48.19 billion) under deposit. The State Postal Bureau publishes an annual concise catalog of newspapers and magazines. It also set up a website (www.chinapost.com.cn), where readers can subscribe to magazines and newspapers online. China Post also assigns a code number to each periodical for easy subscription. In addition, China Post publishes a weekly Panorama of Chinese Books, Newspapers, and Magazines to provide readers with timely information.

The second-tier wholesalers of magazines consist of local postal distributors, local syndicated distributors, and private individual distributors. At present, there is one wholesale market for newspapers and magazines in each region or large city where wholesalers and retailers operate. Half of all the Chinese magazines are traded at such wholesale markets. The transactions between wholesalers and retailers are done through cash. Retailers are not willing to make large orders and the small amount of the cash transactions is detrimental to a newly launched magazine.

The retail sales of newspapers and magazines rely mainly on newsstands, supermarkets, convenience stores, hotels, and restaurants while some bookstores also sell magazines. In addition, most post offices also sell newspapers and magazines. Hotels primarily sell high-end magazines and imported magazines which are supplied by the China National Publications Import & Export (Group) Corporation and Foreign Language Bookstores.

Currently in many large cities, there are a number of retail chains that own a network of newsstands. The most well-known are Shanghai Oriental Newspaper and Magazine Service Co., Ltd., Shanghai Subway Book and Magazine Service Co., Ltd., and Beijing Paper Tiger Book Co., Ltd. All of these distributors control hundreds of newsstands under uniform management and supply practices. For example, Shanghai Oriental Newspaper and Magazine Service Co., Ltd was cofounded by the Shanghai Postal Bureau, Liberation Daily, Wenhui-Xinmin Newspaper Syndicate and Shanghai Press and Publication Bureau. Shanghai Oriental has 2,600 employees and distributes 600 newspapers and magazines. On average, each employee earns RMB1,500 (about US$181) per month.

In addition to the above-mentioned distribution channels, more and more magazines have been relying on self-distribution in recent years. Most of them are high-end magazines such as Rayli and Trends that enjoy good retail sales and substantial advertising revenues.

The main model of self-distribution is to hire provincial agents to handle local distribution. For example, Marie Clairecame up with the provincial distribution plan shortly after it was launched and advertised to hire distribution agents simultaneously in 27 provinces.

3. The Audio-Video Market

The audio-video market is not as well defined as that of books or magazines. According to Wang Ju, Executive Vice Secretary-General of China Audio-Video Association, the audio-video market has sales of RMB20 billion (US$2.41 billion) with two billion units sold. However, the China Press & Publications Statistics indicates that only 374 million audio/video tapes and discs were sold in 2002.

Audio-video product distribution shares some similarities with book and magazine distribution but also has its own distinctive features. China’s audio-video distribution consists of privately owned chain stores, the Xinhua Bookstore system, audio-video superstores, and the postal system. Large bookstores and supermarkets all have audio-video sections and sell books and audio-video publications side by side. Some post offices also sell audio-video publications along with newspapers and magazines. In addition, audio-video publications have their own distribution channels and retail stores, which include professional audio-video chains, audio-video superstores, and independent audio-video stores.

Audio-video chains are the most distinctive features of the audio-video business. They are the fastest growing among chain operations of all publications including books, magazines, newspapers, and electronic publications. By 2002, there were 80 audio-video chains that owned 3,000 stores. Some notable audio-video chains are Jingwen Audio-Video Chain Co., Ltd., Shanghai Yamei Audio-Video Chain Co., Ltd., Shenzhen Boenkai Audio-Video Chain Co., Ltd., and the Oriental Audio-Video Chain Co., Ltd. The Jingwen Audio-Video Chain is affiliated with Jingwen Record Co., Ltd. and owns 300 audio-video stores. The Shanghai Yamei Chain now owns over 200 stores spread around Shanghai. Oriental Audio-Video Chain is another large chain affiliated with Shanghai Xinhua Distribution Group that owns about 160 audio-video retail outlets. Shenzhen Boenkai Audio-Video Chain owns 30 stores.

To operate a national audio-video chain store requires approval from the General Administration of Press and Publications. Seven companies have obtained permits to run national audio-video chains. They are the Shanghai Yamei Audio-Video Chain, Jingwen Audio-Video Chain, Xinhua Yizhan, Sunchime Film Studio Development Corporation, China Record Corporation, Guangdong Jingcai Wuxian Cultural Co., Ltd., Beijing Gehua, and Chinese Media.

Audio-video superstores (also called audio-video cities) are another unique feature of the audio-video market. Presently, there are 50 audio-video cities that are over 500 square meters in size. The biggest and most famous one is Guangdong Audio-Video City, with stores engaged in both wholesale and retail sales and stocks 55,000 titles. Its stores handle 70% of all audio-video wholesale trade. In 2002, the distribution volume reached RMB1.5 billion (US$181 million). More than 142 companies including many large audio-video distributors have set up counters at Guangdong Audio-Video City. The city even has a commercial website (www.cnave.com).

China’s audio-video market was the first segment of the publication distribution market to open to foreign competition. In 2002, Sony Music Entertainment Inc. (U.S.) formed the Shanghai Epic Music Entertainment Co., Ltd. (SEME) with Shanghai Xinhui Disc Group and Shanghai Jingwen Investment Co., Ltd. SEME is the first cooperative joint venture which has obtained national distribution rights for audio-video publications. The three companies invested a total of US$30 million and now SEME has established a wide distribution network by partnering with 60 audio-video wholesalers and retailers. In addition, two Hong Kong-registered public companies, COM and Sun TV, acquired the Guangzhou Hongxiang Audio-Video Co., Ltd. and Media Pioneer Limited (affiliated with Jingwen Records). They have used the shells of these acquired Chinese companies to enter the Chinese audio-video market.

Private enterprises have taken the lead in the Chinese audio-video market. In 2002, China Audio-Video hosted the “Star Brand” appraisal and promotion event. Among the top 15 “Star Brands” of audio-video distributors, 14 of them are private enterprises. The top 15 distributors recorded annual sales over RMB1 billion (about US$121 million) and distributed over 30,000 backlist titles, one-third of which they own the copyrights to.

4. State-Owned and Private Distribution Companies

The Chinese mainland publication distributors consist of both state-owned and private companies. There are 248,600 people employed in publication distribution. Previously the state-owned distributors had almost the entire market and private distributors only accounted for a negligible part. In the past 10 years, however, private distributors have grown rapidly. Today, private distributors share the book distribution market with state-owned booksellers. In 2002, there were 71,824 bookstores and bookselling outlets, out of which 13,368 were state-owned, accounting for only 18.6% of the total number. The remaining 58,456 were private booksellers. However, the state-owned bookstores still have the upper hand in distribution volume and sales revenue with the state-owned Xinhua Bookstore System accounting for 76.7% of total copies distributed and 65.5% of total book sales in 2002. What needs to be noted is that the distribution of textbooks is completely contracted to state-owned companies and textbooks account for half of the entire book market. If textbooks are excluded, private enterprises sell more books than the state-owned companies.

The state-owned bookstores in the Chinese mainland are made up mainly of Xinhua Bookstores. The name “Xinhua Bookstore” originates from “Shaanxi Yan’an Xinhua Book Bureau” founded by the Communist Party of China. In 1949, most of the state-owned bookstores were named “Xinhua Bookstore” by Chairman Mao Zedong. Presently, the Xinhua Bookstore is not a unified national book chain. At the provincial level the Xinhua Bookstore is a specialized regional book distributor, which has a degree of control over Xinhua retail bookstores at the prefecture and county levels in the province. The provincial Xinhua bookstores are independent profit centers and are not subsidiaries of the Xinhua Bookstore General Store in Beijing. The General Store only plays the role of overall coordinator.

In recent years, the book distribution system has undergone rapid reform, notably with the formation of distribution groups and bookstore chains. The formation of distribution groups took place mainly among Xinhua bookstores within each province. In 1999, the Chinese mainland’s first book distribution group, the Jiangsu Xinhua Distribution Group, was born. Soon afterwards, Guangdong, Sichuan, and Shanghai also formed their own book distribution groups. Today, seven book distribution groups have been approved by the General Administration of Press and Publication to operate on a trial basis. The original Xinhua Bookstore General Store has merged into the China Publishing Group. In January 2003, 3,000 Xinhua bookstores, each a single legal identity, formed a not-for-profit professional association— the China Xinhua Bookstore Association. By the end of 2002, the Xinhua network had 13,200 bookstores and 150,000 employees.

Private book distributors have been called Second Channel distributors in comparison with the state-owned Primary Channel distributors. Over the past 20 years, the Second Channel has grown from infancy to its adolescent stage and from chaotic to standardized operations. Highly educated professionals replaced the less qualified personnel within the Second Channel. The status of Second Channel has been changed from “underground” to “well-established.” Today, the Second Channel holds half of the market share in book distribution.

As highly educated professionals entered the Second Channel, a number of well-run independent bookstores emerged and the image of private bookstores has improved substantially. Consumers now see private bookstores in a different light. There are quite a number of established private bookstores in the Chinese mainland. In Beijing, there are Guo Lin Feng Bookstore, Feng Ru Song Bookstore, Wansheng Bookstore, Sanwei

Bookstore, and Long Zhi Mei Bookstore. In Shanghai, there are Penguin Bookstore and Jifeng Bookstore. Well-established private bookstores are also found in other parts of the Chinese mainland such as the Photosynthesis Book City in Xiamen, Wanban Book City in Shaanxi, Southwest Wind Bookstore and Xixi Fo Bookstore in Guiyang, Dongyu Bookstore in Shenyang, Lingyu Bookstore in Foshan, and Random Book Square in Wenzhou. In 2002, two privately owned superstores opened: Yongzheng Book Shopping Center in Guangdong Province’s Dongguan, and Nanjing Book City. Both stores have sales floors of 12,000 square meters with 100,000 titles. They are by far the largest among all privately owned bookstores.

In addition, some private booksellers also engage in book packaging. These entrepreneurs have had great influence on the book publishing industry. They are concentrated in Beijing, Guangzhou, Chengdu, and Shenzhen. The most well-known are Beijing Zhihong Education Group, Beijing Reader’s Cultural & Arts Co., Ltd., Zhenyuan Work Studio, Wuhan Jiuzhou Book Company Ltd., Shanxi New Century Educational Bookstore, Shaanxi Xuehai Book Distribution Center, and Guangzhou Xueyuan Book Group. Book industry insiders estimate that there are some 2,000 companies and studios involved in book packaging. They produce about 20,000 titles annually, accounting for 20% of all new books published. Industry insiders also estimate that there are 25 private booksellers whose annual book sales exceed RMB100 million (US$12.05 million). Many of them specialize in study guides and school supplementary readings. For example, Ren Zhihong, a high school teacher of Chinese language, founded the Beijing Zhihong Educational Group in 1993. The group specializes in publishing and distributing school guides and supplementary readings. Zhihong now employs 240 people and produces and distributes 600 new titles per year. Now the company has expanded its business to social science books, educational training, and educational information.

In addition to book packaging and distribution, many private entrepreneurs work in cover design, publishing consulting, and book marketing. Many private companies have made themselves the leaders in their fields. For example, Xiaokang Studio, Renshou Workshop and Jingren Studio in book design; Beijing OpenBook Market Consulting Center, and Beijing Hui Cong Media Research Center in book industry consulting; and Beijing Book Media Research Institute in book marketing.

At present, private entrepreneurs still face restrictions in certain fields and do not have the same privileges as state-owned companies. For example, private booksellers are not allowed to distribute textbooks and a few other book categories (mainly books on the Communist Party of China and political documents). On September 1, 2003, the General Administration of Press and Publication (GAPP) issued the new Regulations on Publications Distribution Market, which further reduced the restrictions on private booksellers.

B. Different Book Sales Outlets

There are about 71,800 book sales outlets including independent bookstores, book chains, online bookstores, and book clubs. The majority of bookstores are independent but in the past two years, book chains have grown very fast, but they are still regional and rarely operate across provincial borders. Online bookstores and book clubs only started recently but they also are growing fast. Independent bookstores include mini-bookstores, general bookstores, superstores, and professional stores. Superstores have much larger sales volume and revenues, and therefore have a greater impact on the market. As China has joined the WTO, various joint-venture bookstores are expected to emerge.

Large wholesale markets, trade fairs, and book fairs form an an important component of book sales. Modern distribution and fulfillment systems are being built and the international book trade volume grows each year, even though it is comparatively small now.

1. Book Superstores

Book superstores are called “Book Cities.” They all have large retail spaces and carry a wide range of products with a large selection of titles. At present, there are 20 superstores larger than 10,000 square meters in the Chinese mainland. The most famous superstores are Beijing Book City, Beijing Wangfujing Bookstore, Shanghai Book City, Shenzhen Book City, North China Book City, Guangzhou Book City, Hubei Publishing and Culture Book Shopping Center, Nanjing Book City, Chongqing Book City, and Chongqing Liujiangmen Modern Book City. (See Figure 5.4.)

The majority of these superstores are operated by a provincial or municipal Xinhua Bookstore, or by another state-owned bookseller. They are not only huge in size, but are also equipped with modern facilities and offer a comfortable environment for shopping. They stock a wide range of products and a huge selection of titles. Their sales volumes are also very impressive. For example, Beijing Book City is 16,000 square meters in size, employs 700 people, and offers 230,000 titles. Eighty percent of new titles in the Chinese mainland are on the shelves here. In 2001, it had annual sales of RMB260 million (US$31.33 million), becoming the leader for single store sales in China. In September 2002, it set the one-day sales record of RMB2 million (US$240,964). In addition to traditional state-owned bookstores, other industrial groups have begun to invest in book sales and distribution in recent years. Notably, the Guangdong Nuclear Power Group invested in building two superstores in Chongqing: the Chongqing Linjiangmen Modern Book City and the Chongqing Shapingba Modern Book City. The former is 24,000 square meters large and claims to be the largest bookstore in size. The latter is about 10,000 square meters.

What is worth mentioning here is the emergence of privately owned superstores in recent years. The well-known private superstores are Dongguan Yongzheng Book Shopping Center in Guangdong Province, Nanjing Book City, and Zhidao Book Square in Beijing. All three are over 10,000 square meters in size and stock over 100,000 titles.

In addition, several superstores are now under construction. Ten new superstores are planned to be opened in 2004. The most notable one is the Shenzhen Nanshan Book City, which will be 25,000 square meters, possibly the largest bookstore in the Chinese mainland in terms of physical size.

Professional bookstores are another kind of independent bookstore with unique features. At present, there are no statistics covering the number of professional bookstores in the Chinese mainland. Most professional bookstores specialize in social science books and are relatively well known to the public. In addition, there are professional bookstores specializing in medical, computer, legal, and architecture books. The best-known social science bookstores are the Beijing Taofen Book Center, Guo Lin Feng Bookstore, Feng Ru Song Bookstore, Wansheng Bookstore, Xueeryou Bookstore in Guangzhou, Xianfeng Bookstore in Nanjing, Scholar Bookstore in Changchun, Xiaofeng Bookstore in Fujian Province, Xi Xi Fu Bookstore in Guizhou Province, Jifeng Bookstore in Shanghai, and Hongwen Bookstore in Chengdu. Many are privately owned.

There is a relatively large number of computer and medical bookstores. According to industry experts there are over 100 professional medical bookstores. The most well-known are the Keyuan Book Co. in Changsha, Kexing Book Co. in Hangzhou, and Golden Camel Bookstore in Beijing. The well-known computer, science, and technology bookstores are Huangshun Bookstore in Xinjiang Autonomous Region, Dule Bookstore in Chengdu, Golden North Bookstore in Harbin, and Huiju Bookstore in Changsha. China Law Book Company is a famous legal bookstore. Many professional publishers also have their own professional bookstores. For example, the China Architecture & Building Press owns several bookstores. There are also foreign language bookstores in many big cities. These stores sell mainly English language books but they also carry books in other foreign languages such as Japanese, German, French, and Russian. The Beijing Foreign Language Bookstore and the Shanghai Foreign Language Bookstore are the largest foreign language bookstores.

2. Chain Bookstores and Book Clubs

If we exclude audio-video chains, there are dozens of chain bookstores, most of them regional. Very few of them operate across regions and a true national chain is non-existent. There are three kinds of chain bookstores: wholly owned, franchise, and hybrid. (See Figure 5.5.) A regional chain is normally formed by a provincial Xinhua bookstore and its subsidiary Xinhua bookstores at the prefecture and county levels. These Xinhua chain stores are wholly owned.

In addition, there are some privately owned chains such as the 21st Century Jinxiu Book Chain Co., Ltd., Jifeng Bookstore, Guanghe Bookstore, Xiaofeng Bookstore, and Lingyu Bookstore.

There are also quite a number of franchise chains such as the Modern Bookstore and the Xishu Bookstore. The Modern Bookstore is affiliated with the China National Publishing Industry Trading Corporation. It has opened more than 10 franchise stores in the Chinese mainland and also set up franchise outlets in Malaysia, Singapore, the United States, and Vietnam. Xishu Bookstore claims to have 500 franchise bookstores, most of which are small bookstores.

Some book “hybrid” chains consist of both wholly owned stores and franchise stores. The Joint Publishing Commercial Bookstore, Foreign Language Bookstores and chain bookstores formed by the Guangzhou Daily Publishing Group and Southern Daily are typical “hybrid” book chains. The Guangzhou Daily book chain not only set up two medium-sized book cities of 10,000 square meters in size, but also opened 100 chain bookstores, of which 30 stores are wholly owned while the rest are franchise operations.

In 2002, chain stores that were jointly invested and operated by Chinese and foreign partners were launched. In February 2002, Sony Music Entertainment Inc. (U.S.) formed a Shanghai Epic Music Entertainment Co., Ltd. (SEME) with Chinese partners. SEME is the first joint venture approved for audio-video distribution after China joined the WTO. Later, Bertelsmann purchased shares of the 21st Century Book Chain. The two sides

will form a new joint-venture company, which is expected to be the first national book chain jointly owned by Chinese and foreign investors.

In addition, many firms such as the Xinhua Bookstores and the post offices in Beijing, Shanghai, and Guangzhou are making detailed plans to open city-wide book chains. New book chains continue to be set up but in general, the operation of book chains in the Chinese mainland is still at the start-up stage. the Chinese mainland still lacks the modern, national super book chains similar to Barnes & Noble or Borders in the West.

Book clubs have existed for less than 10 years in the Chinese mainland. The earliest book clubs include the Guangzhou Seven Star Book Club, Zhengzhou Reading Club, and Guangzhou Book Club. The number of book clubs gradually increased after the second half of 1998. Now, there are

several dozen book clubs but only a dozen of them have any appreciable scale or influence. The main operators of book clubs in the Chinese mainland include publishers, state-owned bookstores, book import-export companies and privately-owned bookstores. (See Figure 5.6.) Bertelsmann, China National Publications Import & Export (Group) Corporation (CNPIEC), Book Lovers, Xishu, and Biweekly Forum are the most influential book clubs. Some book clubs have their own publications and websites. The Bertelsmann Book Club, jointly founded in Shanghai by the German Bertelsmann AG and China Science and Technology Book Company, is not only the first joint-venture book club approved by the government, but also the largest and most influential book club in China. At present, the book club has 1.5 million members, set up eight membership recruiting centers (six in Shanghai and two in Beijing), and has created an online media house (www.bolchina.com). Its annual revenues are over RMB100 million (US$12.05 million). (See Chapter 10-D.)

Online bookselling in the Chinese mainland also underwent fast growth in recent years. Today, there are more than 300 online bookstores in the Chinese mainland. Joyo.com, Dangdang.com and Bol.com.cn are a few of the leading examples.

3. The Wholesale Market, Distribution Logistics, Book and Trade Fairs

Wholesale markets and distribution logistics centers are the cornerstone of logistical support for bookstore sales. The publication wholesale markets underwent fast growth and now operate on large scales. Large wholesale markets serve as distribution centers for publications. They tend to be concentrated in urban areas that offer convenient transportation. Chinese cities capable of such large volume distribution are Beijing, Shenyang in Northeast China, Xi’an in Northwest China, Changsha and Wuhan in Central China, Nanjing and Shanghai in East China, Chengdu in Southwest China, and Guangzhou in the South.

The most well-known large book and magazine wholesale markets are the Sweet Water Garden Book Wholesale Mart in Beijing, Yangtze River Delta Book Wholesale Market in Nanjing, Book World in Wuhan, Ding Wang Dai Book Wholesale Market in Changsha, Wen Miao Book Wholesale Mart in Shanghai, Haiyin Book Mart in Guangzhou, and Shang Qin Lu Book Mart in Xi’an. Sweet Water Garden Book Wholesale Mart in Beijing is the largest and most influential wholesale market with the widest network of clients. It is 13,000 square meters in size and houses 400 booksellers. Its annual wholesale volume is RMB2 billion (almost US$241 million).

In contrast to large wholesale markets and superstores, distribution and fulfillment operations lag relatively behind. To keep up with new developments, Beijing, Jiangsu Province, Zhejiang Province, and Liaoning Province have all begun to build modern logistics centers to serve the trade and many new publication distribution centers have been put into operation. Logistics centers now in operation or under development are the distribution center of Jiangsu Xinhua Bookstore Group, the logistics center of Zhejiang Xinhua Bookstore Group, the book distribution center of Beijing Xinhua Bookstore General Store, and the fulfillment center of Jilin Xinhua Bookstore Group. (See Figure 5.8.) Taiwanese and foreign logistics companies have also entered into Chinese distribution logistics market through joint ventures. The Century/Qiuyu Distribution Co., Ltd., a joint investment between the Shanghai Century Publishing Group and Taiwan Qiuyu Fulfillment and Distribution Company, is already in operation. The Taiwan Elite Bookstore has entered into the market by providing logistics center development plans for Chinese book distributors such as the Xinhua Bookstore of Jiangxi Province.

By the end of 2004, several large logistics centers in the Northwest, East, and Central regions will be put into operation and will substantially modernize book distribution.

Each year many book fairs, book trade fairs, and book order fairs are held. These three kinds of events have different focuses. At book fairs, the display of new books is the priority while the

book sales come second. International book trade fairs focus on copyright negotiation while standard book trade fairs are open to the public for retail sales. Wholesale transactions are also conducted at trade fairs. Book order fairs are mainly for wholesalers and new books are also on display. In recent years, the differences have gradually blurred.

Presently, the most important book fair, book trade fair, and book order fair are the Beijing International Book Fair (BIBF), the National Book Trade Fair and the Beijing Book Order Fair. The BIBF is the biggest event for Sino-foreign copyright and import/export trade. It is held in Beijing at the end of August or the beginning of September each year. BIBF is sponsored by GAPP, the Information Office of the State Council, the Beijing Municipal Government, and other government organizations. The book fair is organized by the China National Publications Import & Export (Group) Corporation. BIBF is the most important copyright trade fair among Chinese and foreign publishers. The exhibition is 26,400 square meters in size with 930–990 booths. Participants come from 40 countries, regions, and international organizations. More than 100,000 book titles and 10,000 audio/video publications are on display. The 11th Beijing International Book Fair will be held at Beijing Exhibition Hall from September 2 to 6, 2004.

The National Book Trade Fair is the Chinese mainland’s largest book retail event. It is held in a different city each year over the last 10 days of May. The trade fair is mainly for retail sales and the transaction volume is huge. So far 13 such fairs have been held. There were 996 stands at the last National Book Trade Fair. Of these, there were 773 bookstands, 162 magazine stands and 101 stands for audio-video and electronic publications with more than 150,000 titles on display. The trade volume exceeded RMB16.7 million (US$2.01 million) at the main exhibition center and there were additional orders totaling RMB1 billion (US$120.48 million). The 14th National Book Trade Fair was held in Guilin in the Guangxi Autonomous Region in May 2004.

The Beijing Book Order Fair is held every January during which book publishers and wholesalers sign order agreements over four days. About 554 publishers, 100 magazines, 52 second-tier wholesalers and publishers’ branches, and 78 publishing-related companies participated in the 2004 fair. In addition, 69 overseas Chinese bookstores also participated. There were 1,642 stands at the fair and orders totaled RMB2.59 billion (US$312.05 million).

In addition to the ongoing national book trade events, there are many other book fairs, trade fairs, and book order fairs every year. Most events are regional and, or category specific. Other major international book fairs in the Chinese mainland include the Beijing International Audio, Video and Electronic Book Fair and the Beijing International Children’s Book Fair.

4. Publication Import & Export Trade

Engaging in the publication import and export trade requires a special business license. There are about 40 book import and export companies in the Chinese mainland. (See Appendix 5.) They are all state-owned and most are affiliated with provincial press and publications administrations or large publishing corporations.

For example, the China International Book Trading Corporation is affiliated with the China International Publishing Group. The Tianjin Publications Import and Export (Group) Corporation is affiliated with the Tianjin Municipal Press and Publications Administration. The China National Science-Technology Information Import and Export Corporation, Beijing Company is affiliated with the China Science Publishing Group. The largest book import and export companies with full services in the Chinese mainland are the China National Publications Import & Export (Group) Corporation, the China International Book Trading Corporation, the China National Publishing Industry Trading Corporation, the Beijing Publications Import and Export Corporation, and the Shanghai Book Traders. The latter two also own the Beijing Foreign Language Bookstore and the Shanghai Foreign Language Book Store.

The China National Publications Import & Export (Group) Corporation, affiliated with China Publishing Group, is the largest book importer and exporter. Its headquarters is in Beijing with branches in six cities including Shanghai, Xi’an, and Guangzhou. It also has overseas offices in the U.S. (New Jersey), U.K. (London), Germany (Frankfurt), Russia (Moscow), Japan (Tokyo), and Singapore. It has total assets of RMB2 billion (US$240.96 million) and employs 2,300 people and in 2002 its revenues totaled RMB1.4 billion (US$168.67 million).

In 2002, the total trade volume of publication imports and exports reached US$127 million. The publications import volume of all kinds of publications exceeded the export volume. The overall trade volume in book imports and exports is much smaller compared to that of developed countries, the main reason being insufficient purchasing power in foreign currency terms. An additional reason is that there have been substantial increases in the acquisition of foreign translation and reprint rights.

In 2002, exports of books, newspapers, periodicals, audio-video, and electronic publications totaled US$19.58 million while imports were US$107 million. The trade deficit was US$82.42 million. For books, exports totaled 3.21 million copies with a total value of US$136.3 million, and import ran to 2.58 million copies with a total value of US$262.2 million, a trade deficit of US$12.59 million. For magazines, exports totaled 2.06 million copies with a total value of US$3.03 million and imports totaled 5.12 million copies with a total value of US$61.2 million, a trade deficit of US$58.17 million. For newspapers, the Chinese mainland exports ran to 940,000 copies with a total value of US$740,000 and imports totaled 6.48 million copies with a total value of US$7.45 million, a trade deficit of US$6.71 million. For audio-video and electronic publications, imports totaled 885,000 copies with a total value of US$2.71 million and exports totaled 829,500 copies with a total value of US$12.23 million, leading to a US$10.06 million trade surplus.

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