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China is moving to lower the business threshold of running audio and video chain stores in a move analysts believe is designed to counter pirated products and illegal downloading.

People who set up audio and video chain businesses in China can expect an easier introduction as the minimum registration fee will be reduced from five million yuan (US$625,000) to one million yuan (US$125,000), according to the new rules.

 

For a large-scale company with branches across the country, the minimum registration fee will be five million yuan (US$625,000). This is down from 30 million yuan (US$3.75 million).

 

A spokesman of the Ministry of Culture said yesterday that the market for audio-video chain stores was "shrinking" because their high operational costs made it hard for them to compete with street venders hawking pirated discs and a plethora of websites offering free downloads.

 

The number of DVD and CD stores plummeted from 2,000 to 700 in the southern city of Guangzhou, which is believed to be one of worst hit in China by piracy.

 

Chain stores of audio-video products first developed in major cities such as Beijing, Shanghai, Chengdu, and Shenzhen. But in most of the cities, buying discs from chain stores is just not popular, the spokesman said. Legitimate audio-video shops are increasingly hard to find in downtown Shanghai, he added.

 

The regulations, released by the Ministry of Culture, will take effect on December 1, 2006. Procedures for the application to set up audio and video business are also expected to be simplified. It will replace a previous regulation on wholesale, retail and lease of audio and video products, enacted in March, 2002.

 

In another move to slash operational costs, the new regulation also scrapped the rules on the size of chain stores, which means that licenses will now be issued to "chain stores" barely larger than a counter.

 

Cultural officials said the new regulations were designed "to (provide) convenience to the sale of legal audio-video products and set up barriers for the pirated ones." China has launched a string of campaigns to ban pirated CDs and DVDs that are sold on the streets for as low as 4 yuan (US$0.5) each.  

 

In September police said they'd destroyed nearly 13 million pirated CDs, DVDs and computer software during a 100-day intensive crackdown on piracy. Over 8,900 shops and street vendors were closed down in two months, state police records.

 

According to the new regulations, shops found selling more than 100 counterfeit discs will face severe punishment and possibly have their licenses suspended. Pirated discs and profits generated from their sale will be confiscated, the regulations state, but shop owners may be given more lenient punishments if they reveal the source of the pirated discs.

 

Intellectual property rights (IPR) protection has been an issue for China in its trade relations with the United States. On Tuesday visiting US Secretary of Commerce Carlos Gutierrez described IPR protection as a "huge problem" for China but the country was "showing an increasing ability" to deal with the issue.

 

(Xinhua News Agency November 16, 2006)