On June 2, 2009, the Ministry of Culture announced new measures to encourage private investment in cultural industries, with a particular emphasis on Private Arts Performance Organizations (“PAPOs”). The “Several Opinions on Promoting the Development of Private Arts Performance Organizations” (“2009 Opinions”) also call for increased financial support for PAPOs from government agencies.
Pursuant to the “Regulations on Administration of For-profit Performances” issued by the State Council on July 7, 2005, foreign investment in the operation of performance venues and brokering agencies for stage performances is permitted in equity joint ventures or cooperative joint ventures, provided that Chinese shareholders hold no less than 51% of the equity interest in the joint venture company or hold a controlling position in the cooperative joint venture company. For Hong Kong and Macao investors, there is no such requirement. However, foreign investment (including investment from Hong Kong, Macao and Taiwan) in arts performance institutions is still prohibited in China.
In April 2005, the State Council issued “Several Decisions Regarding Non-publicly-owned Capital Investments in Cultural Industries” (“Decisions”), which officially permitted non-publicly-owned capital investment in the cultural industries field, including investment into arts performance groups, stage performance brokering agencies, and performance venues. In November 2005, the “Opinions on Encouraging the Development of Private Arts Performance Groups” were jointly issued by the Ministry of Culture, the Financial Department, the former Ministry of Human Resources, and the State Tax Bureau (“2005 Opinions”) in order to promote the development of private arts performance groups by simplifying the approval procedures for their establishment and encouraging private investment into those groups.
The Chinese government is increasing both the speed and scope of marketization in cultural industries with the 2009 Opinions. These efforts include:
- Converting State-owned Arts Performance Groups (“SAPG”) from public institutions into corporations, and encouraging PAPOs to participate in the reorganization of SAPG by means of joint venture, joint cooperation and acquisition;
- Encouraging investment of private capital in PAPOs; and
- Cancellation, on a trial basis, of administrative permits for Chinese for-profit arts performances within China.
Conversion of State-owned Arts Performance Groups from Public Institutions into Corporations
Beginning in early 2005, PAPO were encouraged to participate in the reorganization of SAPG by means of joint ventures, cooperative agreements, and acquisition. Pursuant to the 2009 Opinions, the Ministry of Culture further revised the limitation that investment of private capital into SAPG be permitted solely at the local level via amendments now allowing for investment at the national level.
Encouraging Investment of Private Capital into PAPO
Limitations on investing in cultural industries were reduced by the 2005 Opinions when the requirements on minimum registered capital and certificates for individual performers were canceled. Following the 2005 Opinions, PAPOs were allowed to be established in various corporate forms including sole shareholding, partnership and via joint venture. Additionally, performers who have terminated their employment agreements with SAPG have now been encouraged to set up PAPOs.
The 2009 Opinions also require support for PAPOs at the appropriate government levels, including special support funds, discount interest loans, awards, and free or low rental pricing for performance stages.
Cancellation of Permits for For-profit Performances
According to the “Regulations on Administration of For-profit Performances” issued by the State Council on July 7, 2005, permits should be issued by cultural administrative authorities at the county level prior to holding for-profit stage performances. For performances involving the participation of foreign artists or groups, permits are granted by relevant cultural administrative authorities at the national or provincial level.
Pursuant to the 2009 Opinions, the Ministry of Culture has encouraged, on a trial basis, the cancellation of administrative permits for Chinese for-profit performances at the local government level. Further, in the case of Chinese for-profit performances, groups engaged in “non-material cultural heritage” arts performances, as well as PAPOs serving farmers and grass roots organizations that have received awards of excellence from the Chinese Propaganda Department and Ministry of Culture, are no longer required to obtain approval from the culture administrative authority. Instead, they need only to file a notification prior to staging performances.
Observations and Implications
The 2009 Opinions represent China’s continued marketization of its cultural industries. They aim to encourage government authorities to provide increased support for PAPOs, while relaxing approval procedures for establishing PAPOs and holding for-profit performances. The 2009 Opinions suggest that Chinese authorities are increasingly supportive of private investment in SAPGs.
Since China embarked upon its cultural industries reform program, a number of state-owned arts performance groups have been successfully converted from public institutions to corporations through the use of private capital. Examples include the Beijing Children’s Arts Theatre Company, the Shanghai City Dance Company, and the Jiangsu Performance and Arts Group. Although various arts performance groups at the local and national levels are technically allowed to participate in the reorganization, in practice, reorganization of SAPGs directly administered by the Ministry of Culture is still rare.