Warner Bros InternationalCinemas (WBIC) has decided to stop investing in the Chinese cinema market dueto a tightened policy on foreign investment, the company said in a statement inShanghai today.

However, Warner Bros' otherinvestments in China, including local-language production and home video, will not beaffected the statement said.

The main reason for thedecision is a change in Chinese regulations in late 2005.

In 2003, the "ProvisionalRegulations on Foreign Investments in Cinemas" allowed foreign companies tohold stakes of up to 75% in cinemas in seven Chinese cities on a trial basis. Basedon this policy, WBIC started to expand its reach through joint ventures withseveral Chinese partners.

In 2004, the company becamethe first Western player approved to hold majority ownership in a Chinesecinema, when it took a 51% stake in a joint venture with Shanghai UnitedCircuit for a multiplex in Nanjing.

However, the "SeveralOpinions on Foreign Investment in the Culture Industry", issued in late 2005, requestedthat "Chinese mainland investors must own at least 51% or 'play a leading role'in their joint ventures with foreign investors".

"The significant regulatorychanges have made a big impact on our business in China. After looking at all possible solutions in the pastone year, WBIC has no other options than to stop its investments in cinemas inthe market," the WBIC statement said.

According to a spokespersonat WBIC's PR firm in China, Ruder Finn, the decision to withdraw was made inlate September.

Warner Bros' otherinvestments in China - including the film production joint venture Warner ChinaFilm HG, a home entertainment joint venture and Warner Brothers Studio Stores -remain in operation in China.

Local Chinese media reportedthat an official from the State Administration of Film, Radio and Television(SARFT) commented that in future, foreign investments in cinemas are to abideby the 2005 new regulation. SARFT officials could not be reached at press time.