FOCUS: Massive advertising explosion looming for mainland China - WTO, Internet among most significant influencers

<p>China has become the world's second-largest economic market, </p><p>according to the International Monetary Fund Association (IMF), which </p><p>ranks world markets according to Purchasing Price Parity (PPP). </p><p><BR><BR> </p><p>IMF figures show that the US has PPP of 20.8 per cent; China in second </p><p>place scored 12 per cent, while Japan took third place with 7.4 per </p><p>cent. </p><p><BR><BR> </p><p>This provides China with a very solid foundation in terms of versatile </p><p>business opportunities to attract major foreign investment, apart from </p><p>those categories which will likely flood the market once the WTO </p><p>agreement comes into being, such as telecommunications, banking, </p><p>insurance, distribution and retail. </p><p><BR><BR> </p><p>Last year, total adex in China - where there are 64,000 ad agencies </p><p>employing 587,000 staff - reached RMB 62.2 billion (US$7.5 </p><p>billion), 15.7 per cent up over 1998. </p><p><BR><BR> </p><p>Spend on television was RMB 35.8 billion, representing growth of about </p><p>15 per cent over the previous year; while newspapers earned RMB 14.6 </p><p>billion and magazines, RMB 600 million. </p><p><BR><BR> </p><p>Though more than one-third of the total media investment was spent in </p><p>the three key cities Shanghai, Beijing, and Guangzhou, other markets </p><p>(particularly the Western region, for which the central government has </p><p>already announced a series of development plans) continue to offer </p><p>invaluable opportunities. </p><p><BR><BR> </p><p>Since 1995, an increasing number of provincial TV stations have moved </p><p>onto the satellite platform, thereby offering nationwide coverage and </p><p>challenging CCTV's once-unique claim of being the only true national </p><p>broadcaster. </p><p><BR><BR> </p><p>A number of provincial networks, such as Hunan Satellite, have clawed </p><p>significant share of market and are building formidable reputations, </p><p>while others, such as Star TV's Phoenix channel, have built solid </p><p>audience bases in all key cities, translating into solid advertising </p><p>revenue. </p><p><BR><BR> </p><p>According to the latest CSM rating reports, CCTV is forecast to suffer a </p><p>continuous downward trend in the affluent coastal areas, such as Tianjin </p><p>and Shanghai, where audience shares have dropped by more than 20 per </p><p>cent. </p><p><BR><BR> </p><p>Nonetheless, CCTV's well-established position and its authoritative news </p><p>programming are helping to protect its current share (about 25 per cent) </p><p>of the total TV adex pie. </p><p><BR><BR> </p><p>Cable TV, meanwhile, is increasing its own claim over advertising </p><p>revenue in China, by providing better programming with more popular </p><p>dramas and variety shows, and increasing its coverage via </p><p>networking. </p><p><BR><BR> </p><p>Shanghai Cable TV, which almost doubled its revenue in the last year, </p><p>plans to pioneer networking with Suzhou Cable and Changzhou Cable TV </p><p>(both are neighbourhood cable networks) to expand its base of coverage </p><p>and influence. </p><p><BR><BR> </p><p>Cable TV is likely to become even stronger in the near future, when </p><p>broadband technology has matured sufficiently to allow video-on-demand </p><p>and other interactive programming. </p><p><BR><BR> </p><p>What will be the impact of the WTO agreement on advertising in </p><p>China? </p><p><BR><BR> </p><p>It is generally believed that the categories most likely to experience </p><p>significant impact - and therefore strengthening competition - are </p><p>pharmaceutical products, automotive business, telecommunications and </p><p>finance (including insurance). </p><p><BR><BR> </p><p>This is because the WTO deal will result in lower duties and the </p><p>abolition of import quotas, allowing foreign investors to enter </p><p>previously restricted business categories and sparking speculation that </p><p>trade activities in China will easily double over the next six </p><p>years. </p><p><BR><BR> </p><p>Besides foreign investment, local governments will almost certainly fund </p><p>and assist state-owned enterprises to face foreign competition. </p><p><BR><BR> </p><p>For example, within the mobile phone sector, which saw 44 per cent </p><p>growth last year to reach 40 million users, the government is ready to </p><p>inject RMB 1.4 billion to support local mobile phone manufacturers in </p><p>order to compete with the current three giant companies. </p><p><BR><BR> </p><p>Technological development will also accelerate the growth of advertising </p><p>in China, where the number of Internet users doubles every six </p><p>months. </p><p><BR><BR> </p><p>The current figure, according to China Network Information Centre </p><p>(CNNIC), is more than eight million users, with Beijing boasting the </p><p>largest user pool (21 per cent of total users). </p><p><BR><BR> </p><p>Guangdong and Shanghai take second and third place respectively, with 12 </p><p>per cent and 11 per cent of total Internet users nationwide. </p><p><BR><BR> </p><p>As a result of the explosion of the Internet arena, San Francisco-based </p><p>MyWeb Inc.com recently joined CNNIC along with other leading websites in </p><p>China to develop a unified system to measure Web traffic. </p><p><BR><BR> </p><p>By the end of 1999, there were an estimated 15,000 websites in China, </p><p>with ecommerce turnover reaching US$40 million last year, from </p><p>just US$8 million in 1998. </p><p><BR><BR> </p><p>Information technology consultants IDC also predicted that turnover </p><p>would even reach US$3.8 billion by 2003 - this would be the </p><p>result of growth of 100 times over three years. </p><p><BR><BR> </p><p>The development of the Internet is affecting affiliated media businesses </p><p>in various ways; for example, cable subscribers sooner or later will be </p><p>able to access the Internet for general interest subjects, education and </p><p>real-time financial information, via set-top boxes connected to their </p><p>televisions. </p><p><BR><BR> </p><p>Shanghai's Radio, Film and Television Bureau has signed a 15-year </p><p>contract with the joint-venture company T&L to provide Internet access </p><p>to its more than three million subscribers. </p><p><BR><BR> </p><p>In summary, unlimited advertising opportunities are blossoming in China, </p><p>but at the same time, the media scene is increasingly competitive and </p><p>fragmented. </p><p><BR><BR> </p>