China’s Film Industry Takes Measures to Compete With Hollywood

Transformers 4

The Chinese film market has been experiencing a huge boom in the past few years, and if the recent reports coming out of the region are any indication, the numbers are destined to move even higher. New developments, including tax breaks, film funding, and other major changes to the Chinese film industry, are making it possible for the region to compete closely with Hollywood in the near future.

Of course, to say that China is on the verge of catching up with the United States and Canada (the two countries are counted together in the MPAA’s market reports) when it comes to the global share of ticket sales is still a bit of a stretch. In 2013, U.S. and Canada earned $10.9 billion at the box office while China came in a distant second at $3.6 billion. But despite the wide gap, it’s the explosive trend over the past couple of years coupled with the fact that China is not anywhere near its full potential in market share that many onlookers believe it could one day be the largest film market in the world.

In an attempt to make its domestic film business more competitive with Hollywood, the Chinese government recently outlined several measures including tax incentives and a fund for state-approved films. The Chinese finance ministry said on its website that the changes would “enhanc[e]the overall strength and competitiveness of Chinese films.” The film fund will reportedly distribute $16 million between five to ten films with “influential themes.” Additionally, “competitive films” will be offered assistance while Chinese films in general will receive added support when they move overseas, along with professional movie website design. 

But it’s the tax exemptions in particular that could have a huge impact on China’s rapidly growing film market. According to THR, any income from a film company’s screenings in villages and rural areas will be completely exempt from tax. That includes income from copyright transfer, film distribution, and screenings. Similar tax exemptions will exist for film distribution in central and western China where rapid cinema expansion is already occurring and a massive population of future movie-goers exists. When paired with the government’s plan to invest in theater infrastructure and its encouragement of financial institutions to invest in the growing industry, you start to get the sense that China will edge closer to the number one box office spot sooner rather than later.

Although most of the measures have not been established yet, it’s already obvious how much the government’s push for film is impacting the Chinese film industry. It was announced June 19 that the state-owned China Film Group would finally go public after years of negotiations. The Chinese film giant, which does everything from producing, to importing and exporting, distributing, operating theater chains, selling film equipment, and even managing talent, is planning a $740 million IPO before it hits the stock market listing in Shanghai.

Additionally, it was announced on June 20 that China’s Light Chaser Animation Studios had raised $20 million from GGV Capital with lofty goals of competing with Pixar Animation Studios. Light Chaser, which was founded by Gary Wang and was purchased by Youku for $1 billion in 2012, is aiming to create, “world-class animated films with a Chinese cultural touch.”

“The movie market in China is booming, and certainly there is a very significant growth space for Chinese animated feature films,” GGV Capital managing partner Jixun Foo wrote in a statement. “We are impressed by the vision and execution capability of Light Chaser. Within a very short period of time, they have built up an excellent team and a world-class animation production pipeline. It’s very exciting that Light Chaser’s animation and CG capabilities are already at a level close to Hollywood.”

And don’t forget about Hollywood’s role in the China boom as ticket sales continue to increase. For years, American studios have recognized the potential for exporting films to China, but governmental measures make it far more difficult for Hollywood to get a foothold in the industry. The biggest impediment by far is China’s restrictions on how many foreign films may be shown in Chinese cinemas. In 2011, the cap stood at only twenty imports per year, but in recent years the number has increased to a soft cap of 34.

Hollywood has also explored hybrid American/Chinese productions in recent years to stretch the appeal of its productions in China. In a trend that is sure to continue in the coming years, films like the upcoming Transformers 4: Age of Extinction have heavily marketed to Chinese audiences through advertising and also feature Chinese actors and locations. Transformers 4 will even be edited completely differently for Chinese audiences.

But the strategy has also been likened to Hollywood pandering, and it isn’t difficult to see why. The Chinese release of Iron Man 3 for example had three minutes exclusive to the film that feature Chinese movie stars Wang Xueqi and Fan Bingbing, but viewers noted that the added scenes seemed to be completely disconnected from the film. Early promotion seems to indicate that Transformers 4 more successful integrates the Chinese and American content, but it’s hard to see the strategy not interrupting the creative process. 

But regardless of how or if Hollywood can profit from the Chinese explosion in film, there’s no doubt that the China will soon become a worldwide name in film. And one day, it might even overtake Hollywood.

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