Guangzhou Daily: From Rag to Riches to...

China's venerable newspaper faces stiff new competition

The Guangzhou Daily has come a long way since it was launched as the local Communist Party organ a half-century ago. Once little more than a compendium of statistics on industrial production and mind-numbing transcripts of official speeches, the paper now features plenty of hard news and sports, plus sections on travel, real estate, and finance. The entertainment pages recently offered an article on Julia Roberts, complete with a color photo splashed across three columns. Then there was a takeout on the 2,500-year history of cosmetic surgery in China and another detailing a local man's 30-hour struggle to save a bird that had collided with his kite.

Granted, the Daily may not be The New York Times or Le Monde--or even The Daily Mirror. But it's typical of the rough-and-tumble newspaper market in China's most dynamic province, Guangdong. A few publications there are rewriting the rules of Chinese journalism by producing news that's fit to print. They're also proof Beijing is allowing some media to put profit before propaganda, although journalists who overstep the bounds still risk getting sacked.

Leading the pack is the Daily, whose readable fare has helped make it China's most commercially successful paper. With a circulation of 1.6 million, the Daily has attracted a blue-chip roster of advertisers including Motorola (MOT ), Toyota Motor (TM ), and IBM (IBM ). Last year, it earned $36.6 million on revenues of $219 million. Its $188 million in ad sales accounted for nearly 10% of all spending on print advertising nationwide.

The paper's success has boosted the fortunes of its parent company, the Guangzhou Daily Group. Owned by the local Communist Party, the group has put together a stable of 16 publications, including Soccer News, China's biggest sports paper. The group is even branching into real estate via a $550 million commercial and residential complex it is building with Hong Kong property giant Swire Pacific Ltd. (SWRAF )

Success does not go unchallenged for long in China these days, and the Daily's rivals are eager to steal its business. There's the 1-million circulation Southern Metropolitan, a gutsy tabloid that has taken on thorny issues such as organized crime. Its sister publication, the weekly 21st Century Business Herald, has earned a reputation for in-depth economic analysis and aggressive investigations of official corruption. And the broadsheet the New Express News has entertainment and human-interest stories.

The upstarts are making inroads. The Daily's revenues are expected to grow just 2% to 3% this year. "The competition from local papers is very serious," says Wu Suisheng, the Daily's deputy managing director of advertising. What's more, the paper has been rocked by scandal. In October, the general manager of the property arm of the Guangzhou Daily Group was convicted of taking bribes from a building-materials company. Earlier this year, Group President Li Yuanjiang and He Xiangqin, editor-in-chief of the paper, were detained in a broader inquiry into corruption. Although no formal charges have yet been filed, the Party is keeping the company--and its journalists--on a shorter leash.

That pressure will make it harder to stay ahead of the competition. The Daily owes much of its success to the relatively free rein it enjoyed as a government-designated pioneer of press reform. It was the first paper in the country allowed to expand coverage beyond official state handouts, the first to grow beyond a four-page format, and the first to feature attractive design and color, helping win advertisers. In 1990, it was the first to take over its own distribution from the post office, ensuring early delivery.

Now, competitors are adopting the Daily's innovations. Fat with news and ads, they all have their own delivery operations and are more visually appealing. So the battle for readers will be increasingly fought on content. But it's the little guys who are pushing the envelope in their reporting. The Daily--notwithstanding its features on actresses and bird rescues--does little to rock the boat. "Our reporting is still mostly positive and mainstream," admits business editor Guan Yamen. The Daily, for all its success, will have to do better than that if it doesn't want to become yesterday's news.

By Frederik Balfour in Guangzhou

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