Running a profitable newspaper in China is like walking a tight-rope. This is how Li Yuanjiang sees his job as editor-in-chief and president of the Guangzhou Daily (Group), which owns one of the most profitable of the country's 2,800 newspapers. Unfortunately for Mr Li, news that appeals to his readers sometimes irks the authorities. Newspapers are, after all, the mouthpiece of the Communist Party. After several years on the job, however, he has mastered the art of balance. 'I think it's not that difficult after all; as long as we go for the facts,' he said. State control over the press had been relaxed over the past 10 years, setting an irreversible trend of openness, Mr Li said. In addition to his editorial functions, Mr Li as president is responsible for the group's operations. This job has taken on a new dimension since the State Council approved a plan to turn the newspaper organisation into a news group last January. It is the country's first experiment in running a media organisation on socialist market economy principles. Whether the scheme will be expanded, or how fast, will depend on its success in generating income while remaining under state control. Mr Li, also deputy chief of the city's propaganda department, said the purpose of turning news organisations into news groups was to beef up their financial strength so that they could stand on their own feet. China's media has been dependent on the government's financial support, which has been falling recently as more funds are devoted to infrastructure projects. 'The result of tight government funding is that we will not have a full stomach and yet we will not be starved to death,' Mr Li said. 'But this has seriously hampered the development of newspapers in upgrading technology, raising the quality of employees and diversifying business. 'What we aim to do now is to reduce the need to get blood transfusions from the government by raising capital through the market,' he said. Preparations for the company's transformation into a news group began some time before state approval, the effects of which were already reflected in the group's performance last year. Average daily circulation of the flagship Guangzhou Daily rose to 780,000 compared with 570,000 in 1995. Advertising revenue has grown as businessmen set their sights on the higher purchasing power of Guangzhou citizens. Last year, the group received average daily advertising revenue of more than one million yuan (about HK$932,100). The improvements have been achieved by enlivening presentation, although the state still requires that the group publish important - yet very often boring - news and commentaries. The Guangzhou Daily has boosted its appeal by introducing colour pages, more news about the Pearl River Delta and stronger supplements. Incentives have been offered to the distribution division to promote sales. In addition, the group is to invest 700 million yuan in printing machines that will push the paper's deadline back by 70 minutes. The group is enthusiastic about turning its new printing plant near Foshan, Guangdong, into a showcase for the industry. The printing plant should be completed by the end of next year and, to diversify the group's income, it will also be used for outside printing work. The group is also engaged in property and the retail business, and managers are reorganising its structure to reflect the new range of activities. There will be three core areas - publication, printing and property. When it is completed, the group will look for foreign partners but only for areas that do not involve news publishing. While the operation and ownership of China's news media will remain off-limits to foreigners for the foreseeable future, the group still wants to use foreign capital and technology to speed up its development. It is also prepared to list its non-publication businesses once given the go-ahead. Mr Li said that the property business, started in 1995, was set to become one of the group's main income earners. With the recovery of the property market in Guangzhou, the group launched its first flat sale last year. It made 200 million yuan in sales after an outlay of 40 million yuan. Mr Li said that the group planned to launch flat sales each year, with the focus on small residential developments in old districts. It has a land bank of 3.22 million sq ft bought with 200 million yuan generated by its publishing business. The move into property has facilitated the group's push into retailing. The group has a chain of 50 convenience stores which sell publications, stationery, telephone cards and daily household products. The number is expected to reach 200 by the end of next year. To symbolise its rapid rise, the group plans to spend 1.5 billion yuan on a landmark headquarters building in Guangzhou's Tianhe district. A further 500 million yuan will be used to develop staff quarters, while 200 million yuan will be spent buying sites to expand the convenience-store chain. 'With the solid foundation we laid in the past few years, our group is ready for a take-off at the turn of the century,' Mr Li said. 'No matter how we diversify, newspapers remain our root.'