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Words are cheap in Hong Kong newspaper war

Not only are Hong Kong newspaper publishers prepared to earn nothing from selling their papers, one publisher is actually paying vendors to sell them.

The newspaper price war that brought about this crazy state of affairs broke out in earnest at the weekend but has its roots in the June launch of the brash and innovative Apple Daily. Alone among the mass-circulation dailies, it says it will stand up to bullying from China and now claims to be outselling all other papers in the colony.

On Saturday the established market leader, the Oriental Daily News, announced it was slashing its price from HK$5 (about 40p) to HK$2; it was quickly followed by all the other mass-circulation papers, with one exception. However the Hong Kong Daily News went a step further and dropped its price to a mere HK$1. Previously all newspaper prices were controlled at the same level by an informal cartel.

At this price the Daily News is having to pay vendors HK$0.75 for every copy sold.

The Oriental Press Group, publisher of the Oriental Daily News, says it started the press war ''to reward readers on our 28th anniversary''.

This version is not accepted by a senior executive at Sing Pao newspaper, who said his paper was forced into price-cutting after the Oriental Daily News launched the price war because it can no longer tolerate the threat posed by Apple Daily. ''They want to retain their market leadership,'' he said.

Apple has responded by knocking just HK$1 off its HK$5 cover price, promising to freeze it at that level until 1997, ''unless the situation gets much worse'', said Loh Chan, the paper's editor.

His paper is a mixture of sex and crime stories, alongside hard-hitting political commentary and some of the best news reporting in Hong Kong.

The paper's publisher is Jimmy Lai, the former retail clothing tycoon. He has been one of the Chinese government's least favourite publishers since he wrote a blunt, insulting article about the Chinese Prime Minister, Li Peng.

China's dislike of the new paper was signalled as soon as it was published and Apple reporters were banned from covering a meeting of Hong Kong policy advisers in Peking.

The paper has proved there is a strong market for a publication prepared to consistently criticise both China and Chinese officials. The extent of its popularity has led to rumours that China will close Apple after it resumes sovereignty over Hong Kong in 1997.

Meanwhile, the price war is sending the shares of newspaper companies through the floor. Ken McKenzie, publisher of local trade magazine Media, said: ''I just don't think a price war at a time of rising newsprint prices makes sense for a prudent business, but there's a lot of passion in newspapers.''