The State Council, China’s cabinet, released a circular on Dec 25 to transform commercial cultural institutions into enterprises and enhance the development of cultural enterprises.

According to the circular, commercial cultural institutions should be registered properly as a limited liability company or a joint stock limited company, and corporate governance structure should be improved.

Companies engaged in content production and distribution should set up special positions of chief editor and art director. Meanwhile, management structure should also be simplified to promote resource integration.

The circular said asset management is crucial in the transformation of commercial cultural institutions into enterprises, including asset inventory, evaluation and registration. In addition, State-owned cultural enterprises should publish regular reports on their financial and operating situations, as well as on any social benefits they create.

A budget system for the use of national capital will be built and improved to promote mergers, reorganizations, transformation and upgrades of State-owned cultural enterprises, in an effort to achieve a layout optimization of the culture industry.

After the transformation, enterprise income distribution system will be adopted, and social security taxes will be levied according to regulations for enterprises. But they will be exempt from income taxes for five years after the transformation.

Enterprises should sign labor contracts with employees upon registration according to laws, pay basic pensions and social insurance for those leaving their posts, and provide economic compensation for those who are laid off.

In order to enhance the development of cultural companies, both central and local finances will introduce innovative capital input methods and improve preferential policies through the special fund for culture industry development.

Efforts will be made to guide and support cultural companies to provide more products and services by means of government purchase and consumption subsidies.

In the transformation process, social capital is encouraged to enter culture industries, and State-owned culture industry investment funds will make equity investment in cultural enterprises in key sectors. As a result, cultural enterprises with diversified investment entities will grow, and eligible companies can apply for listing.

The policies are applicable to all cultural companies, and the enforcement period will be from Jan 1, 2019, to Dec 31, 2023.