Lights! Camera! Trade Action!

Tian Jin, China’s vice-minister for film and TV, complains that the film industry trade deal struck between Washington and Beijing in February is working as intended. The deal exempted 14 U.S. 3-D and large format films from China’s annual import quota for foreign films, of 20. It also gave Hollywood a bigger cut of the takings on its films, raising it to 25% from 13%, albeit still short of the 30% American producers typically get on foreign distribution. The consequence, Tian says, is that “the past dominance of domestic firms in the Chinese market has been shaken.”

Such is the power of art, or at least the popular art form that is the Hollywood blockbuster movie. But there are serious lessons in all this for any industry that has been able to shelter cosily behind domestic walls of protection (and not just in China).

First is that more free trade increases business all round. Box office revenues at Chinese cinemas, at 13.3 billion yuan ($2.2 billion) in the first ten months of this year, have just passed 2011’s total of $2.1 billion. Domestically produced films took 41.4% of those receipts, down from 2011’s 53.6%. “A huge drop,” Tian says, but the overall pie is larger. Domestic films’ share will increase by year’s end as foreign films have evaporated from cinema’s schedules for December, just as they did mid-year for a month.

Second is that given a choice, consumers will take it. There is a well observed effect worldwide that increasingly cosmopolitan and upwardly mobile middle classes go through a phase of looking down upon local films as cheap and tawdry. That Hollywood blockbusters appeal to Chinese audiences can scarcely come as a surprise to China Film Group Corp., the state-owned film producer and distributor whose remit includes the monopoly on the import of foreign films (and their distribution schedule). The three top grossing films in the country last year were Transformers 3, Kung Fu Panda 2 and Pirates of the Caribbean: On Stranger Tides.

Third, if the Chinese film industry is going to hold its ground against foreign films–and remember to set against the quota of 34 foreign films a year now allowed, the U.S. alone releases 8,000-9,000 new films a year, so the market is barely opened–it will have to improve the quality of its product. It is not the first national film industry to wilt under the assault of Hollywood. Three-quarters of a century ago, France, Germany and the U.K. all had flourishing domestic film industries. Neither France nor Germany’s had the size of market to sustain French and German-language filmmaking on a global scale. Britain, too, though not hampered by language, lacked the resources to compete with Hollywood.

The most notable example of national film industry thriving regardless is India’s. Like China it has a large domestic language film industry that has also been protected. But Bollywood, and its smaller Kanada-language sibling Banglawood, is very good at what it does, and is so on industrial scale. So, too, is Hong Kong’s film industry, before 1997 the third-largest producer of films after Hollywood and Bollywood. It found an identity distinctive enough to have imposed itself on Hollywood’s action movie genre, even if its own filmmakers have become more muted over the past 15 years. China’s filmmakers will have to emulate that craft. And it is what Beijing will push them to do if it wants to emulate the soft power that Hollywood projects for Washington.

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Filed under Politics & Society, Trade

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