Exhibitors speaking at aCineAsia panel on Wednesday said they're urgently seeking clarification on China's regulations concerning foreign investment in thecinema industry.

In a session entitled "ChinaExhibition: Applying the Global Experience to the China Market", Warner BrosInternational Cinemas (WBIC) and South Korea's CJ CGV spoke of the challengesthey face in the China market, including limited film supply and restrictionson foreign investment in cinemas.

The Chinese government iscurrently drafting new rules that will determine whether foreign investors inChinese cinemas can hold majority stakes. According to WBIC president Millard Ochs, the draftregulations state that foreign companies are permitted to hold up to 51% stakesin Chinese cinemas, but clarification is needed on a proposed ruling that theChinese partner should have a "leading role" in future developments.

"It's not clearly definedwhat leading role means," said Ochs. "It's a complex issue that needs to beresolved very soon."

Under a pilot programme introducedby SARFT at the end of 2003, foreign investors were able to hold stakes of upto 75% in cinemas located in seven key cities, while a limit of 49% applied inall other locations.

WBIC, which currently part-ownsor manages eight multiplexes in China with various partners, became the first Westernplayer approved to hold majority ownership in a Chinese cinema last year, whenit took a 51% stake in a joint venture with Shanghai United Circuit for amultiplex in Nanjing.

However, SARFT rescinded theprogramme a few months ago and is now drafting new rules. Ochs said thatWBIC's ownership of a majority stake in the Nanjing multiplex would not be affected by the regulatorychanges.

Meanwhile CJ CGV CEO Park Dong-ho said his company is keen to replicate thesuccess it's had in Korea with state-of-the art multiplexes in the China market but that current regulations have made itdifficult to invest.

"We've found that it's hardto implement our technical skills and management expertise in this market," Parksaid.

Park said he believes thatgrowth and development of China's cinema industry will be slow if companies withtechnical and management skills aren't allowed to control cinemas.

"This business isn't just abouthardware - it also involves servicing and marketing," Park said. "To successfullymanage a multiplex, companies with expertise in these areas should have aleading position."

Ochs added that majorityownership is crucial to companies that operate under US accounting law as itenables investors to demonstrate value to shareholders. "We want to invest a lotof money in this market and we need Chinese partners in order to do this. But weneed to have 51%," Ochs said.

Earlier in the seminar, Ochs,Park and Shanghai Film Group president Ren Zhonglun outlined the positiveimpact of modern, well-managed multiplexes on box office in developing markets.

Korean admissions haveincreased more than three-fold since multiplexes were introduced in the late1990s while China's box office grew 50% last year following investment in around 200 newscreens. In the city of Harbin,total box office has increased by 468% since a multiplex managed by WBICthrough a joint venture with the Wanda Group opened earlier this year.