Hollywood Lusts for China Film Sales, with Caution

Hollywood filmmakers are joining forces with Chinese companies to gain a foothold in the Asian nation's huge movie market -- but obstacles remain in the form of commercial restrictions and censorship.

China is by far the world's fastest-growing cinema market and, despite official barriers to entry and limits on artistic freedom, the world's second-largest economy is proving a huge draw for foreign filmmakers.

Chinese box office sales rose 64 percent last year to $1.5 billion, as economic woes sent the 2010 U.S. box office down 5.72 percent to a 13-year low of $10.57 billion.

In recent weeks, two of Hollywood's biggest names, Relativity Media -- producer of "The Social Network" -- and Legendary Pictures, maker of "Inception", have announced deals to make films for the Chinese market.

Both hope to produce movies that will appeal to both Chinese and wider international audiences -- a potentially lucrative plan but one that industry insiders said should nonetheless be approached with caution.

State-run companies still control the importing and distribution of foreign films in China, despite a 2009 World Trade Organization ruling that overseas firms should be allowed greater participation.

China also protects its domestic industry by only allowing around 20 foreign movies to be screened a year, making it difficult for overseas studios to capitalize on growing demand from the country's emerging middle class.

"China lost the WTO case and is supposed to let foreign companies into distribution," said commercial lawyer Steve Dickinson, who has practiced in China since 1991 and whose firm has clients in the industry.

"But the law hasn't changed -- it's just in flux and the bottom line is that everything is still subject to Beijing's approval," he told Agence France Presse.

Hollywood films are on average twice as profitable as China's local productions, but co-productions that bring foreign filmmaking expertise to bear are increasingly lucrative.

Working with a Chinese partner to make movies with local investment and talent allows foreign filmmakers to get around the import cap.

Foreign partners can also negotiate a larger share of the takings from co-productions, which in the first half of 2011 accounted for 32 percent of the box office for Chinese-language films in the country, than they can for imports.

Relativity said it would co-produce what it called "cross cultural" films with Beijing-based Huaxia Film Distribution and SkyLand Film-Television Culture Development.

Legendary and its Chinese partner, Huayi Brothers Media, have announced plans to make a movie titled "The Great Wall" about the origins of the Chinese icon, and have signed Edward Zwick of "Last Samurai" fame to direct.

But experts warned that censorship could be a problem for foreign companies unused to China's sometimes unpredictable restrictions on artistic freedom.

In 2007, Xinhua said censors halved actor Chow Yun-fat's screen time as a villain in Disney's "Pirates of the Caribbean: At World's End" because his scenes were "vilifying and defacing the Chinese".

This June, state media quoted acclaimed director Jia Zhangke saying that he had abandoned a spy film because of limits on freedom of expression, and censorship had stopped him making a film about a man's sex life.

"If I want to make the movie here, I have to portray all the communists as superheroes," Jia said. "This kind of cultural over-cleanliness that bans the erotic, violent and terrifying is cultural naivety."

Peter Shiao, who chairs the U.S.-China Film Summit annual industry gathering, said: "This is a transformative moment because the economics are right to make movies that appeal to both markets."

But added: "Despite the 60-plus-percent growth, making films here is not as easy as it might seem."

There are also concerns that while co-productions in Chinese might sell well in China, exporting them could be tough.

Few Chinese-language films -- with the exception of Zhang Yimou's "Hero" and Ang Lee's "Crouching Tiger, Hidden Dragon" -- have done well in big Western markets.

Earthquake drama "Aftershock", from Legendary's partner Huayi, fizzled earlier this year in United States cinemas, where subtitled films rarely perform well.

"The new partnerships are going to benefit Chinese companies in the short-term but many of them are not up to their Hollywood partners' level," Bai Qiang, chief executive of production company 3-D China, told AFP.

"Their ability to write scripts that will appeal outside China is very limited."