China's Encounter with Global Hollywood

Cultural Policy and the Film Industry, 1994-2013

Wendy Su

• Publisher: The University Press of Kentucky
• Year: 2016
• ISBN:
  9780813167091
• Topic: Medios de comunicación y artes escénicas
• Subtopic: Películas y vídeos

In recent years, the film industry in the People's Republic of China has found itself among the top three most prolific in the world. When the Chinese government introduced a new revenue-sharing system in 1994, the nation's total movie output skyrocketed with gross box-office receipts totaling billions of yuan. This newfound success, however, has been built on an alternately competitive and collaborative relationship between the ascendant global power of China and the popular culture juggernaut of America.

In China's Encounter with Global Hollywood, Wendy Su examines the intertwining relationships among the Chinese state, global Hollywood, and the Chinese film industry while analyzing the causes and consequences of the rapid growth of the nation's domestic film production. She demonstrates how the Chinese state has consolidated power by negotiating foreign interest in the lucrative Chinese market while advancing its cultural industries. Su also reveals how mainland Chinese and Hong Kong filmmakers have navigated the often-incompatible requirements of marketization and state censorship.

This timely analysis demonstrates how China has cannily used global capital to modernize its own film industry and now stands poised to step clear of Hollywood's shadow. The country's debates—on- and offscreen—over cultural change, market-based economic reforms, and artistic freedom illuminate China's ongoing efforts to build a modern national identity.

1

Cultural Policy as Negotiation of Power

The Chinese State’s Role and Strategies in Its Tug-of-War with Global Hollywood

China’s Hollywood policy actually parallels its film sector’s marketization and industrialization process and its bid to join the World Trade Organization (WTO) in the context of its expedited pursuit of a “socialist market economy” after 1992. To borrow a phrase from the New York Times, a “One Party Market Economy” may be the best description of China’s experiment with “socialism with Chinese characteristics” during the last two decades of the twentieth century.¹ After a temporary stagnation following the 1989 incident at Tiananmen Square, Chinese helmsman Deng Xiaoping embarked on a South China tour to push a new round of economic reform. During the Fourteenth National Congress in 1992, the Chinese Communist Party (CCP) decided that the ultimate goal for national development was to establish a socialist market economy. At the same time, the CCP promulgated a resolution to speed up the development of the tertiary sector, including film, TV, and broadcasting, which paved the way for reform of China’s film sector.¹

Following the Soviet model of state ownership and a planned economy, the Chinese film industry was nationalized in 1953, and not-for-profit public institutions were established for film production, distribution, and exhibition. A total of sixteen state-owned film studios were created to produce 120 to 150 feature films each year, according to the state plan. The state allocated operating funds based on the studios’ budgets for production costs, facilities expenses, and staff salaries. After studios completed their production quotas, the China Film Export and Import Corporation (CFEIC; also called the China Film Distribution and Exhibition Company), the only distribution agent franchised by the state, would purchase the films at 110 percent of production costs and issue prints to local distribution companies. With intensified economic reform in the 1980s, the Chinese film industry underwent a series of institutional restructurings. In 1984 the state urged the film sector to employ entrepreneurial management.¹ Film studios became responsible for their own economic efficiency and received only limited governmental subsidies. By the end of the 1980s, the average shortfall between rapidly rising production costs and state subsidies had reached 10 million yuan per studio. In addition, profits from film distribution went largely to the distribution companies, with smaller shares for the studios. Despite many attempts to redistribute profits and revitalize studios, before 1993, reform in the film sector was merely a modification within the framework of the planned economy. The production sector remained untouched under the regime of state control and ideological censorship, the distribution system was fundamentally unchanged, and the nationwide film market remained split and separate.¹ In addition, competition from commercial television programs, the rampant underground market for pirated DVDs and videotapes and the theaters that showed them, and the newly imported, very popular entertainment of karaoke drew audiences away and led to “audience/market fragmentation.”¹

Since the mid-1980s, China’s domestic film audience had declined by 5 million tickets per year, resulting in a sharp decrease in national box office receipts. Surveys also showed that of the more than 100 Chinese-made films shown in Beijing each year, “70 percent [failed] to recover even their copyright and printing costs, 15 percent [broke] even, and only 15 percent [recovered] their costs and made a profit.” The Beijing Horizon Survey Corporation questioned 1,500 residents in five Chinese cities and found that while 46.9 percent of interviewees cited going to the cinema as their favorite pastime, less than 10 percent regularly watched Chinese-made films.¹ In 1989 more than one-third of studios, more than 900 of 2,300 distribution companies, and about 1,000 of 3,100 urban theaters were debt ridden. Between 1979 and 1991, the national film audience decreased from 27 billion to 14.39 billion. The decline was even more precipitous in 1992: annual box office sales dropped from 2.36 billion yuan in 1991 to 1.99 billion yuan in 1992, and attendance dropped by 3.84 billion.¹ In the first half of 1992 alone, the financial losses of state-owned film studios reached 70 million yuan, and 6,000 film-related enterprises either closed or converted to other businesses.¹ In 1993 CFEIC earned 35 million yuan from its traditional method of buying out foreign films, far less than the 87 million yuan required to subsidize domestic film production. This situation placed a heavy burden on national finances and posed a severe challenge to the domestic film industry.

FILM REFORM AND THE HOLLYWOOD IMPORT POLICY

Reform in the film sector turned a new page in 1993. The Ministry of Radio, Film, and Television promulgated “Suggestions on the Deepening of Institutional Reform of the Chinese Film Sector,” commonly known as Document 3, to end the forty-year model of vertical distribution. Studios now had the right to bypass CFEIC and issue prints of their films directly to local distribution companies and share the profits with them, but they still faced strong regional constraints. The difficulty of selling low-cost prints, the serious shortage of production capital, and high payroll costs gradually brought studios to the brink of bankruptcy.¹

Under such circumstances, the most feasible solution seemed to be to come up with a new way to make profits from foreign imports.¹ Between 1993 and 1994, CFEIC tried to introduce an internationally acceptable system of revenue sharing to import big foreign hits. In September 1993 CFEIC organized the general managers of distribution companies nationwide to lobby the central government in Beijing. In December the newly appointed general manager of CFEIC, Wu Mengchen, submitted a report to the Film Bureau (part of the Ministry of Radio, Film, and Television) on the revenue-sharing system. At a national conference of general managers of film distribution companies held on January 13, 1994, Wu said that the most effective way to revitalize the weak domestic film market was to import foreign blockbusters that had already achieved good box office records overseas. Revenue from these imported films would “enable 500,000 employees of film distribution companies to make a living.”¹ In early 1994 the Film Bureau finally approved the revenue-sharing plan to import ten foreign blockbusters annually, a move that ended “the 40-year-old tradition of buying outdated and low-grade but cheap foreign movies.”¹ From the 1950s to the 1980s, China had primarily purchased outdated foreign films at an average flat fee of US$20,000. Many film exhibitors in China thus believed the Chinese were “second-class citizens” in terms of their access to world cinema.¹ In fact, as early as 1980, the United States had attempted to negotiate with the Chinese about the method of distributing American movies. In 1980 a delegation from CFEIC visited the United States and met with Jack Valenti, president of the Motion Picture Association of America (MPAA). Valenti proposed a revenue-sharing distribution system, but the Chinese insisted on the traditional flat fee. The two sides failed to reach an agreement, partly due to China’s old economic system and the limit on foreign currency at the time.¹ By 1994, the time was finally right for the introduction of a revenue-sharing system.

The criteria for imports were loosely defined by the Film Bureau: they should reflect “the excellent fruits of world civilization and represent contemporary cinematic achievement,” without detailed explanations. Revenue sharing was considered a plan to rescue the market and the economy, rather than a well-defined ideological and cultural policy. Policy makers expected imported megaproductions to fill the gap between production and consumption that most China-made films failed to achieve, revive China’s film market, and raise funds.

With the approval of the government, CFEIC approached Golden Harvest Entertainment, a major Hong Kong company that had set up an office in Shanghai to target the mainland market. The two companies eventually reached a tentative agreement to distribute Golden Harvest films on the mainland on a revenue-sharing basis.¹ Hearing of this unprecedented move on the Chinese side, Warner Bros. and other major Hollywood studios quickly reached similar agreements with CFEIC. After the importation of the first blockbuster, The Fugitive, in November 1994, Hollywood hits such as True Lies, Forrest Gump, The Lion King, and Speed flowed into China. According to the revenue-sharing system, foreign distributors and CFEIC received 46 percent of the total box office earnings, domestic film distributors got 8 to 10 percent, and the remaining 44 to 46 percent went to the theaters. Foreign distributors were responsible for publicity costs and customs tariffs.¹

From the beginning, Hollywood’s return to China was intertwined with reform in the distribution-exhibition sector, and it was sometimes used as leverage to negotiate among different regional and district interest groups. Cold War ideology and old ways of thinking often came into play to complicate this “go global” mentality. A typical example was the distribution process for the first of the Hollywood hits, The Fugitive.

Various accounts have described the fate of this first Hollywood import to China between late 1994 and early 1995.¹ What happened was basically a conflict between CFEIC and the Beijing Municipal Film Distribution Company. The latter was opposed to the former’s strategy of importing Hollywood blockbusters, and as early as April 17, 1994, the company had written to a minister of the central government, accusing CFEIC of being a “newly born comprador.” From March to July 1994, CFEIC attempted to negotiate the distribution of Hollywood imports in Beijing, but the Beijing Municipal Film Distribution Company refused to cooperate. “We Chinese drove eight American film studios out of China forty years ago,” said the company. “These American studios have always been thinking of returning to China, not just out of economic benefit, but out of an attempt to cultivate the third and fourth Chinese generations. How can we invite American movies to conquer the Chinese market, and feed foreign studios by exploiting China’s box office sales?”¹ In September, after CFEIC signed the contract with Warner Bros. to release The Fugitive in China, it had no choice but to bypass the Beijing Municipal Film Distribution Company and sign a distribution contract with the Haidian District Film Distribution Company, which was within the jurisdiction of the Beijing municipality.

Fourteen years later, Han Maorui, general manager of the Haidian District Film Distribution Company in 1994, recalled that when CFEIC contacted him about distributing The Fugitive in the Beijing area, he hesitated at first because of the financial risk associated with revenue sharing. He asked for two days to consider the offer. Han then approached the managers of thirteen urban theaters in the Beijing municipality to solicit their opinions. To his surprise, they all expressed a strong interest in Hollywood imports, given the tremendous box office potential, and they offered Han their full support. Backed by the theaters, the Haidian District Film Distribution Company signed the contract with CFEIC to screen The Fugitive. However, this move escalated tensions, and the Beijing Municipal Film Distribution Company filed a complaint. As a result, the Beijing Cultural Administration, the highest authority governing cultural affairs in the area, ordered Han on October 20 to terminate the contract. But this order came a bit too late: all thirteen theaters had already sold out tickets for the film’s premiere.

On November 11, 1994, the eve of The Fugitive’s release in the Beijing area, prints of the film were transported to the Haidian District Film Distribution Company’s storage facility, and Han went to bed early to get a good night’s sleep before the big day. At 10:00 p.m. several officials from the Beijing Cultural Administration sent for Han and ordered the immediate cancellation of the next day’s premiere of The Fugitive. Han refused because his company would have to pay a large fine if it reneged on the contract. Talks continued until midnight, when the officials suddenly requested to see the prints. Han worried that the prints would be confiscated, so he lied and said they had not yet arrived. When the officials finally gave up, Han immediately removed the prints from the company’s storage facility and drove his car around Beijing’s streets until morning. “I am like an underground agent protecting secret materials,” he said. At 7:00 a.m. on November 12, Han called the theater managers and had them meet him at the Jimen Bridge, where he had parked the car, to pick up the prints. The Fugitive was finally released in the Beijing area, and box office sales reac...