Hollywood Feels the Pinch of Trade War Tensions in China - OZY | A Modern Media Company

Hollywood Feels the Pinch of Trade War Tensions in China

Hollywood Feels the Pinch of Trade War Tensions in China

By Ben Halder


The U.S. film industry’s influence in China may be flagging.

By Ben Halder

When the 2018 Freddie Mercury biopic Bohemian Rhapsody was released in China, it was three minutes shorter than in other markets. The missing footage was a result of Chinese censors removing any reference to homosexuality or AIDS — which killed Mercury — from the movie. And the Chinese market doesn’t just get bowdlerized content: Films like Iron Man 3 have inserted new scenes and characters into the Chinese cuts of movies to appeal to Chinese audiences.

Why take the time to do so? Simple: China’s box office is hugely important to Hollywood. In the first quarter of 2018, the country overtook North America in movie ticket sales for the first time, taking in an estimated $3.17 billion between January and March compared to the U.S. and Canada’s $2.89 billion. That was well ahead of even optimistic predictions that China would surpass North America as the world’s largest box-office market. And while those record numbers didn’t last throughout the year, China is still the second-largest movie market in the world, with a total of $8.8 billion in ticket sales in 2018.

Hollywood has never needed China more. But its influence may be waning — and many believe that its declining importance is due to tensions caused by the past year’s trade war. In fact …

Between 2017 and 2018, the proportion of China’s box office earned by foreign films fell by 17 percent.

According to State Film Administration data, almost 38 percent of China’s total box-office revenue for 2018 came from foreign movies, down from 46 percent in 2017. That may be in part because of trade war tensions, according to trade publication reports last month that quoted local buyers saying they’ve been told not to distribute U.S. content, and American actors in China saying they’ve been blacklisted. Still, Chinese films are also struggling: Of the 62 percent of revenue from domestic productions in 2018, 17 percent was generated by just three hit Chinese movies.

Chinese authorities officially limit the release of foreign films at the Chinese box office to 34 titles a year. The total number in recent years has tended to be higher, with officials turning a blind eye to some and the increase of collaborative projects between Chinese and American studios — which are exempt from restrictions. Discussions to increase the cap, or even to do away with it, were taking place last year but became another victim of the trade war, and were put on hold. Some American films still made it big with Chinese audiences, though: 2018 saw Avengers: Infinity War, Venom, Aquaman and Jurassic World: Fallen Kingdom all break the top 10.

“China, which boasts the largest number of screens and film audience in the world, is a huge, lucrative market for Hollywood,” says Zhen Zhang, associate professor and director of the Asian Film and Media Initiative at New York University. And domestic conditions favor Hollywood movies. “The compounded volatile censorship and commercial pressure, from which domestic films — especially the independently minded and artistically innovative ones — suffer most, create a deformed film market there, where Hollywood blockbusters are still taking up the largest share in terms of the box office,” Zhen says.

Bohemian rapsody

When Bohemian Rhapsody was released in China, it was three minutes shorter than in other markets.

Another reason Hollywood is so keen for more of its movies to reach Chinese screens is that venues in which to watch movies are rapidly increasing. According to the State Film Administration report, 9,303 new movie screens opened across China last year, bringing the total number of screens to over 60,000 — compared to just 40,313 indoor screens in the United States, a year-on-year increase of about 700. This growth is also bringing Hollywood movies to new audiences: Smaller cities in China that previously had little access to the international cinema are now getting a chance to see international blockbusters.

A desire to protect the domestic film industry remains, says Chris Berry, professor of film studies at King’s College London, but the picture is complex. “China’s own distribution and exhibition companies make a lot of money from Hollywood films. So they would not necessarily be opposed to more Hollywood films coming in if they believed it would enable them to make even more money,” he says.

The percentage of the Chinese box office taken by international movies has dipped this low before, in 2015. But that was widely acknowledged as a banner year for Chinese cinema hits, with Monster Hunt and Lost in Hong Kong being particular standouts. That’s not the case this year: In fact, the wide-reaching crackdown on freedom of expression in China has also reached the domestic film industry. A number of recent Chinese titles, including The Eight Hundred — a megabudget historical war film withdrawn at the last minute from this year’s Shanghai International Film Festival — have fallen foul of China’s increasingly strict censorship laws. The Eight Hundred’s particular infringement was overemphasizing the success of Chiang Kai-shek’s Republic of China. Meanwhile, China’s domestic film industry has seen a dramatic drop in available funding over the past year. A government crackdown on financiers, production companies and movie stars using the industry to evade taxes has made the industry nervous, and Chinese productions have taken a hit accordingly.

While China is already one of the key box-office markets for Hollywood movies, restrictions of foreign films have created something of a sleeping giant — one that Hollywood is keen to awaken. With the growth of China’s cinema network and the popularity of American films continuing to rise, an end to the trade war could make Hollywood one of the biggest beneficiaries.

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