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Cross the river by feeling the pebbles," exhorted supreme leader Deng Xiaoping when he launched the reform programme that has transformed the Chinese economy over the past 25 years. That is to say, advance cautiously, experimentally - and be prepared to turn back if you hit mud. Deng's pragmatic establishment of a "socialist market economy" has been astonishingly successful by many measures: with an annual rate of expansion of more than 9 per cent, the Chinese economy is set to become the second largest in the world within a generation.

In the general process of industrial and commercial transformation, China's publishing industries have followed a rather particular course. The 568 state-owned publishing houses were classified until very recently as "cultural organisations" rather than as businesses.

Only in the past couple of years have they been subtly redefined as "cultural enterprises", and only in April 2004 were they directed to become profit-led operations.

Following China's accession to the World Trade Organisation in late 2001, printing has become entirely open to private and foreign investment, and book wholesaling and retailing partially so; publishing, however, has remained formally the preserve of the state. Nevertheless, this has not stopped a huge expansion in output. In 1978, China published about 15,000 new titles, compared with about 40,000 in Britain. By 2003, China had, along with the UK and US, become one of the elite triumvirate of publishing industries, producing well over 100,000 titles.

When the Communists came to power in 1949, illiteracy was running at more than 80 per cent; today, it is less than 10 per cent and Chinese people young and old have a voracious appetite for books. The Chinese publishing industry is now the fourth largest by value, and far and away the largest by volume in the world. The Chinese spend about $4.40 (?2.40) per head a year on books compared with $90 or more in the US, the UK or Germany, but prices are rising and every extra 10 cents a head adds $130 million to the value of the market.

Moreover, publishing is changing. There has been a tenfold increase in the purchase of copyrights from the West in the past five years, and different forms of co-operation, short of formal investment or joint ventures, have been tolerated between the state companies and foreign publishers. The previously quasi-monopolistic central and provincial publishing houses are now competing with one another and with the local private publishers that have emerged under the guise of "cultural studios". At the same time, the boundaries of what is allowed on ideological grounds have been greatly extended.

All this and much more is described and analysed in Xin Guangwei's fascinating book, which supplies a wealth of supporting statistics, league tables and other data hitherto largely inaccessible in English. He covers book, magazine/journal and audiovisual/ electronic publishing in great detail and provides absorbing chapters on foreign trade in books and copyrights and market entry and survival strategies for foreign publishers.

He is a senior researcher at the General Administration of Press and Publications, and he applies the official definition of China ("one country, four regions, two systems"). He includes similar coverage of publishing in the full market economies of Taiwan, Hong Kong and Macau, as well as a brief survey of overseas Chinese publishing, especially in North America (where it is surprisingly extensive) and South-East Asia.

The author is frank about the problems facing the mainland industry. He identifies piracy - which is rife in a country that for 40 years after the revolution had no copyright legislation and a political culture that did not really recognise private economic rights in intellectual property; provincialism - each of the provinces, some of which are markets of 100 million people in their own right, has its own territorially jealous publishing structure; inadequate systems of national distribution; conservative management often lacking modern business skills; and barriers in terms of language and culture.

He is more circumspect in describing the emergent private publishing sector on the mainland, burying the issue in the chapter on distribution. It would also have been interesting to have had more analysis of the challenges faced by the "Groups" - government-led mergers aimed at creating large publishing entities that will be able to face up to the anticipated incursions by Western multinationals.

The author has been largely well served by his translators, but the book might not pass the official Chinese standard of no more than one mistake per 10,000 characters. The excellent Shanxi children's publishing house Hope is transferred from Taiyuan to X'ian in neighbouring Shaanxi; Macmillan is identified as a US company; through the process of double translation the Encyclopedia Britannica becomes the British Encyclopedia and so on. More important, the publishers have failed to provide an index or even a detailed table of contents - omissions they have promised to rectify on the reprint.

Taken in the context of the achievement of the book as a whole, however, these are small matters. This is a truly authoritative and comprehensive guide, essential reading for those engaged in the international book trade, but full of interest for a much wider audience.

Paul Richardson was formerly director, Oxford International Centre for Publishing Studies, Oxford Brookes University.