BEIJING — At the just concluded Beijing International Film Festival, the hottest feature on the bill was the business battle between Chinese and American film industries. The Fate of the Furious, a Hollywood blockbuster, has grossed 2.35 billion RMB ($340 million) since its release two weeks ago in China, and it is projected to become the top grossing movie of the year, as well as the all-time biggest Hollywood release in China.

However, the surge of Chinese capital entering Hollywood studios changes the equation: This supposed Sino-U.S. movie war must be reassessed in light of how Chinese elements are entering the DNA of more and more Hollywood productions. Still, the unprecedented entry of Chinese capital into the American film industry continues to be leveraged, above all, on their home market and domestic film release in China. In other words, the role they play ultimately relegates them to being financial investors, leaving the road still quite long to get real control over content.

Hollywood "dependency syndrome"

According to the statistics of the Weiing Institute, a Chinese movie database, in recent years certain Hollywood films have grossed more in China than at home. This is particularly true for action films such as The Fate of the Furious or for comedies such as A Dog’s Purpose.

Over the past two months, apart from a small bunch of Chinese films made especially for the occasion of the Chinese New Year, foreign movies overwhelmingly crushed the home-grown ones at the box office. On average, a new Chinese film release grosses only 12 million RMB ($1.7 million) whereas a foreign one grosses about 450 million RMB ($65 million). This is in no way accidental. And with the upcoming big Hollywood releases such as Guardians of the Galaxy Vol. 2, Pirates of the Caribbean: Dead Men Tell No Tales, and Transformers: The Last Knight, slated for the months of May and June, the Chinese film market is destined to be crushed by Hollywood blockbusters.

One can’t help but wonder: If there were no limit on the number of foreign film imports, would Chinese cinema eventually vanish altogether?

Yin Hong, director of the Film and Television Research Center at Tsinghua University, explains that the domestic films have tended to rely more on the audiences of small rural cities. But as the film release channels have opened up, this public has also gradually been channeled towards foreign offerings, with their more sophisticated content and technical quality.

Action scene in Guangzhou, China — Photo: Jonathan Kos-Read

What may further accelerate the fall of Chinese movies is the upcoming renegotiation of the Sino-U.S. memorandum of understanding on bilateral issues related to the film industry. Though a member of the World Trade Organization since 2001, China has not liberalized its film market. A total of only 34 foreign films are released per year, among which around 20 come from the United States — and that is, provided that these films share their box office revenues with the local distributors.

Yu Dong, Chairman of Bona Film, a film production and distribution group and the first Chinese audiovisual company to be listed on the U.S. stock market, said the current number of 34 annual releases could be doubled, while the revenue sharing may be bumped up from 25% to over 35%.

In reference to the general worry of the Hollywood "dependency syndrome", Yu told Economic Observer that he is not worried. "As the volume of the market and production increase, even if China further increases the foreign film import quota and revenue-sharing proportion, China’s filmmakers should be confident enough to face any outcome and any impact brought about by foreign films," he said.

Yu also stressed that integration is the best bet for Chinese films and is convinced that the cooperation of capital and talents will effectively create a "global market" where Chinese films can be distributed alongside all the capital, increasingly integrating with the international film industry, and ensuring better and better access to the English-speaking distribution market.

A Chinese audience is perfectly capable of appreciating good movies.​

Still, the most relevant change in the last few years is the injection of Chinese capital into Hollywood, with co-production on such films as Kong: Skull Island by Warner Brothers, Legendary Film and Tencent Pictures, or the handling of local marketing and distribution for A Dog’s Purpose between Alibaba Pictures and Amblin Partners, or between Weiing Times and Paramount Pictures for the film Ghost in the Shell. Increasingly, Chinese producers are participating in the global revenue-sharing of box office and derivatives, and extending their presence from online ticketing towards the upstream cinematic content industry.

Given that many Chinese producers are increasingly betting on directly investing in Hollywood studios and that the American movie import quota will go up, many wonder if Sino-U.S. co-production is still worthwhile. This, in particular, comes in the context of the recent flop of The Great Wall, featuring Matt Damon as a European mercenary in China’ s Song dynasty.

"I personally do not agree that it’s the end of Sino-U.S. co-production of films," says Miao Xiantian, General Manager of the China Film Co-Production Corporation (CFCC). "So maybe it wasn't well received in the U.S. market, but the film has grossed pretty well in China, Russia, and southeast Asia. The Great Wall is the first big English-speaking production made by a Chinese director, Zhang Yimou. It’s a very good effort."

As a semi-official enterprise to help oversee co-productions between Chinese and non-Chinese partners, the CFCC has established a set of specifications for such deals. First, both of the two parties put in not less than 20-30% of the funding. Second, the film involves a Chinese element. Finally, the creative staff include both parties and, in particular, Chinese actors have some of the main roles. Miao stated that so far this year co-productions continue to increase, up from 40 films per year before 2015 to more than 70 since last year.

Huayi Brothers’ Vice President Ye Ning calls for a more open mindset for co-production. "A Chinese audience is perfectly capable of appreciating good movies. A filmmaker’s job is to tell a good story. It doesn’t necessarily imply a specific Chinese cultural content," Ye says. "Emotion and humanity are universal features."