A signage of Tencent is seen at its headquarters in Shenzhen city, South China's Guangdong province, March 29, 2013. [Photo/IC]

Tencent Holdings Ltd is beefing up its efforts at tapping into a boom in online literature, opening a new company in Wuhan, the capital of Hubei province, to deal with any intellectual property issues arising from the sale and use of its original material.

The new firm, set up by Tencent's literature unit China Reading Ltd, will manage the adaptations of popular books into mobile games, TV dramas and movies on behalf of Tencent's best online writers.

The move comes after a book, The Journey of Flower, written by Jiang Chenzhou who is better known as "fresh Guoguo" online, generated 2 billion yuan ($314 million) in commercial revenue after its adaptation into a TV drama become a phenomenal hit in China.

"Our goal is to promote writers in the way we present movie stars," said Zhu Jia, China Reading's vice-president.

"The new company will function as an agent to take care of cooperation deals with publishing houses, movie companies, game developers and music enterprises."

Online original literature is becoming one of the most valuable sources of intellectual property.

Online video site iQiyi.com recently launched its own e-commerce shop selling products such as books and T-shirts.

The Journey of Flower's popularity also helped spawn a mobile game, which has since earned around 200 million yuan in monthly income.

China Reading also owns Shengda Literature, one of China's largest online literature platforms.

It has built up a library of 10 million original books and 4 million online writers, the company said on its official website.

Li You, an official at Wuhan Shared Business Incubator, where the new company will be based, said: "This will attract more online writers and entertainment companies to Wuhan, which will help the city become a copyright trading center for original Web-based books."

There are over 100 game companies and animation enterprises in the incubator.

To attract more Internet companies to the second-tier city, the local government has already said it is rolling out favorable policies such as cheaper office space and tax rebates.

Game startups, meanwhile, are also hopeful that the arrival of China Reading will benefit that market, said He Yunpeng, CEO of games firm Hubei Manzu Game Co Ltd.

"Intellectual property is like mining. A great deal of wealth can be dug out of entertainment, and there are huge commercial opportunities to come out of it," said He.