BEIJING, Feb.16 -- Beijing Media Corporation Ltd is to form a joint venture with Hebei Youth Daily to manage the latter's advertising, printing, and distribution.

    Hong Kong-listed Beijing Media, the only overseas-listed Chinese mainland newspaper and controller of Beijing Youth Daily, issued a statement yesterday announcing the move. The new JV will be named Heqing Media.

    Beijing Media will also invest 18 million yuan (US$2.23 million) into Heqing Media, with Hebei Youth Daily contributing 12 million yuan (US$1.49 million).

    Beijing Media will have 60 per cent of the new firm and three seats on its board, while Hebei Youth Daily is expected to own the rest and can appoint two directors.

    "This will form a significant step for the company's expansion into the advertising business of other newspapers in other regions," Beijing Media said in the statement.

    The move is the first such investment by Beijing Media, since it is rare for a newspaper to control another in a different province, as it is still limited by Chinese regulations.

    Beijing Media shares rose 1.5 per cent to HK$13.50 (US$1.73) yesterday.

    Due to increasing competition in the Beijing newspaper market, Beijing Media's profits in the first half of 2005 dropped to just 170,000 yuan (US$21,000) from 66 million yuan (US$8.18 million) a year ago. Advertising revenues fell by almost 37 per cent to 233 million yuan (US$29 million).

    Wu Xiaohui, research director with the market research company HC International, said the investment is a water-testing move.

    "It may be wrong if we judge the performance of Beijing Media just from the results in the first half, but still it is necessary to reduce reliance on its main paper," said Wu.

    The company raised HK$1.1 billion (US$140 million) from an initial public offering in Hong Kong in December, 2004, and the industry has been waiting to see how it will use the proceeds.

    Wu predicted that second-tier cities would become the focus of media development in the next three years, so it is a good time to tap into markets like Hebei Province.

    However, Tan Xiaoyu, a media analyst with the leading Chinese brokerage Guotai Jun'an Securities, said the investment is too small to make significant changes to Beijing Media's business.

    Hebei Youth Daily had a daily circulation of 42,000 in average in 2005 and its advertising revenues were just 9.91 million yuan (US$1.22 million).

    (Source: China Daily)