China’s friendlier relationship with Hollywood may not extend to loosening its quotas

Despite deepening ties with Hollywood, China may not be ready to scrap an unpopular quota that restricts the number of foreign movies it allows into the country.

That was the sobering assessment of at least one industry analyst Tuesday at a conference in Los Angeles on the much-ballyhooed China-Hollywood relationship.

“There seems to be an assumption that the quota would be lifted in 2017,” said Aynne Kokas, a professor and China expert at the University of Virginia. “It doesn’t seem like there is as much movement as that.”

SIGN UP for the free Indie Focus movies newsletter >>

A 2012 agreement was designed to resolve a bitter five-year dispute that began when the U.S. filed a complaint with the World Trade Organization alleging that China was unfairly restricting access to its market.

Under the deal, China expanded the number of foreign movies it allows into the country each year to 34 from 20 as part of a revenue-sharing agreement. Of the total, 14 must be movies shown in 3-D, Imax or other enhanced formats.

The agreement significantly expanded Hollywood’s access to China’s vast market, which is expected to surpass the size of the U.S. market by 2018, and led to a flurry of deal-making on both sides of the Pacific. Warner Bros., for example, recently signed a deal with a state-backed investment fund to produce local-language movies in China.

The growing ties have fueled hopes that China might end the quota when it expires in 2017, but that might be premature, Kokas said at the U.S. China Film & Television Expo at the Los Angeles Convention Center.

“We have this symbiotic relationship,” Kokas said. “How long the mutual accommodation will last is uncertain.... I see growth in the Chinese media and entertainment industry and not necessarily the parallel growth in Hollywood.”

Although the Chinese government wants to expand its cultural industries, including film, it remains wary of Western culture. Yet Chinese producers need Hollywood know-how to make movies that can do well globally, not just in China.

“They want to exploit the expertise that studios have gained around the global market,” said Shan Dongbing, executive vice president of Fosun Pictures, a Chinese film and TV production company. “They want to bite a bit of that cake.”

China’s film industry is estimated to grow to as much as $6.5 billion this year, up 35% over last year, said Rance Pow, president of Artisan Gateway, a cinema consulting firm.

Most of the growth has been driven by big Hollywood films such as “Furious 7” and “Jurassic World,” but Chinese-language films such as this summer’s hit, “Monster Hunt,” also have been generating big returns.

“The Chinese have rediscovered their own stories,” Pow said.

DreamWorks Animation and other American film companies have set up partnerships with Chinese companies to bypass China’s foreign quotas and grab a larger share of box-office revenues.

But Shan, whose company has invested in Studio 8, the film company run by former Warner Bros. executive Jeff Robinov, said a new wave of Chinese investors is interested in forging direct ties with Hollywood talent.

A digital animation studio backed by Chinese social networking company Tencent Holdings Ltd., for example, has launched an animation studio in Culver City run by former DreamWorks Animation executives.

“Chinese producers are coming over to Hollywood,” Shan said. “They are doing it the Chinese way. I pay you.... I tell you what I want.”

MORE:

Original Force Animation in Culver City aims to tap into vast Chinese box office

For Hollywood, the road to China is littered with broken deals

Warner Bros. in talks to produce local language movies in China through joint venture