Rupert Murdoch's News Corp is to sell control of its three Chinese television channels to a local state-controlled private equity fund in a recognition that its ambitious plan to build and control a broadcasting business in China has failed.

The sale is the most decisive step so far in what has been a gradual retreat by News Corp over the past four years from a media market where the government insists on maintaining tight controls.

China Media Capital, a fund backed by Shanghai Media Group and China Development Bank, both state-owned, has agreed to acquire a controlling stake in Xing Kong, Xing Kong International, Channel [V] Mainland China and its Fortune Start Chinese film library, News Corp and CMC said.

The sale comes a year after News Corp reorganised its pan-Asia Star TV business into separate Star India and Star Greater China units, and also ceded management of Star's English-language content to Fox International Channels.

"They unemotionally realise that their media business there has the best opportunity to grow and profit in the control of local hands – from a regulatory and commercial perspective," said Vivek Couto, executive director at Media Partners Asia.

An industry executive said: "James Murdoch [Mr Murdoch's son] doesn't believe that they can build a business in China – this is a clear sign that they aren't interested in China any more, but they can't say that."

Analysts said CMC's main interest was in gaining access to the overseas distribution channels that could help Chinese media groups internationalise.

Beijing is seeking to make its media industry more commercially viable while retaining political control by building select groups into companies that could project China's voice outside of the country.

The deal with News Corp fits that policy, as it includes the Fortune library and its globally popular content, such as Jackie Chan movies and access to Xing Kong International which broadcasts in Hong Kong and Singapore.

The two companies did not announce financial details of the deal but executives said News Corp would hold on to close to 50 per cent of the assets.

The combined assets of the three channels and the film library are valued at $300m, making the deal worth about $160m, sources said.