ChinaMarket Uncategorized

Brief Look at China’s Film Market


In the past ten years, China has achieved significant economic development. Taking advantage of the low labor cost, China has kept the low-price manufacturing as its advantage in international business. The overseas market demand helped China accumulate its wealth until 2008 when the economic crisis took place in China’s biggest consumer markets Europe and the United States.

Furthermore, the fever in real estate investments since 2007 puts China in high risk of economic crash. In order to achieve a sustainable economic development and to maintain a high economic growth rate, China needs to change the way of economic growth. Putting efforts in consumption oriented economic growth creates an opportunity for China to accomplish its goal.

Entertainment industry is a promising part of the consumption oriented economy. As a result, Chinese government started to emphasize the importance of developing cultural and creative industry from 2005 and has been making incentive policies to encourage the development of cultural and creative industry in a large-scale from 2010.

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In 2012, the central government set up a clear goal for the development of this industry. As an important part of the scheme, to develop the film industry will be a long-term course of action

In 1978, China started to reform and open. After 35 years of development, the country has achieved a significant improvement in material life. However, the demand for spiritual life has been growing but staying unsatisfied.

As cultural and creative product, film has become a popular alternative for Chinese people and going to movie theaters has been becoming a routine for people to hang out.

The Demand

The demand for films both in theaters and out of theaters is growing rapidly. As we see from the table and below, US box office stays stable around 10.5 billion dollars a year while Chinese box office grows very fast with 2.74 billion dollars in 2012. However, the Chinese box office is only slightly more than ¼ of the US box office in 2012. Taken China’s 1.4 billion population into consideration, there’s a huge potential in China’s film market.

Yearly Gross Box Office ( $ in billions)

2009

2010

2011

2012

US

10.60

10.60

10.20

10.80

Growth Rate (US)

0%

-4%

6%

China

0.97

1.64

2.10

2.74

Growth Rate (China)

70%

28%

31%

The Growth

From the graphs below, China’s yearly gross box office increased from 0.14 billion dollars in 2001 to 2.74 dollars in 2012. The annual average growth rate in the past ten years is 34%, while the annual average growth rate in US is 2%. With the increase in personal income and in the demand of cultural and creative products, China’s film market will keep growing rapidly.

Although there’s a huge opportunity in China’s film market, there are plenty of barriers for foreign filmmakers to enter China’s film market.

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The Challenges

Although there’s a huge opportunity in China’s film market, there are plenty of barriers for foreign filmmakers to enter China’s film marketThe number of imported movies is limited. According to the State Administration of Radio Film and Television in China, there are three categories of movies can be imported.

The first is special category movies, mainly consisting of 3D and IMAX movies which related high technologies.The second is buyout foreign movies. Chinese distribution companies will buyout the distribution rights and show rights of the movie.

The third is income-sharing movies. The 2012 agreement between China and the US has increased the income-sharing proportion from 13% up to 25% for foreign companies. This agreement also increased the number of income-sharing import movies to 34, 14 more than 2011 but mainly opening to high-tech movies. Table below shows the import quotas detail in 2011.

Movie Import Quotas (2011)

Special Category

15

Buyout

30

Income-sharing

20

Even though the income-sharing proportion is increased up to 25%, the gap between the income-sharing proportion (43%) of a Chinese production company and that of an imported movie is still significant. In order to obtain the same possible income-sharing proportion, China-US co-production movies become popular recently, especially after Chinese government claimed that China-US co-production movies share the same treatment with China-Hong Kong co-production movies in 2012.

However, after one year of fever in China-US co-production area, questions about the validity of several so-called co-production movies, such as The Expendables 2 and Looper, emerged. The details about the problems and questions about China-US co-production will be presented in the next article. Now the rules for China-US co-production are the ratio of investment for Chinese investors cannot be lower than 1/3, at least one of the lead cast must be Chinese actors, and the movie should have shooting locations in China.

To be continued.

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