US Film Imports to be Cut? SARFT: Yes...No...Maybe, I Don't Know...Can You Repeat the Question?

BEIJING --- Confusion reigned in Hollywood when May saw a number of reports that China film industry regulators SARFT would be limiting the number of US films allowed in on a revenue sharing basis. Adding to the consternation, a number of SARFT officials were quoted in the reports.

Currently, Chinese authorities allow 20 films each year to be screened in China on a revenue sharing basis, typically between 13 and 15 percent of the box office to the foreign side. Prior this policy, China had imported a small number of foreign films each year, never paying more than a flat fee of US$30-50,000 per film.

However, under China's WTO commitments, the number of films allowed in on a revenue sharing basis rose from 10 to 20, and must rise to 40 in the coming years.

This is widely confused to mean that China limits the number of foreign films screened in theaters. In fact, China's foreign film quota is not based on absolute numbers, but a percentage instead. The policy currently allows for no more than one-third of all films screening at a given time throughout the country to be of foreign origin.

The 20 limit refers to revenue sharing only. This 'group of 20' films are typically 'blockbusters' that will be screened nationally. And, therefore, the pack tends to be dominated by Hollywood films that generally have a wider mass appeal than films from other countries.

China Film Group (CFG) is the only agency authorized to import foreign films. It may distribute them itself, or allow Huaxia Distribution (CMM Passim) to distribute as well.

The reports noted that SARFT would lower the number of US, or Hollywood, films allowed in on a revenue sharing basis from 16 to 14. After waiting for a few weeks, SARFT officials finally responded by noting that there never was a fixed number of US films within that 20 and therefore, it would be groundless to say that the number has dropped from 16 to 14; because no number existed in the first-place.

There is some justification for this statement, as last year 18 of the 20 films imported on a revenue sharing basis came from the US.

So, what can this mean? Is there a quota on the number of US films within the 20?

As is so many times the case in China, yes and no.

SARFT officials are simply stating policy fact when they note that there are no official limits on how many films from a certain country can be included. Officials at the SARFT Publicity Department denied that the policy existed, but noted that SARFT would not give any formal interviews on the subject. SARFT only sets the policy, they don’t implement the importation and distribution of the films, this is the job of the CFG.

From the CFG's perspective, they want to bring in the films that have the largest box office potential because simply put, it means less work and more money for them. For better or worse, this often turns out to be Hollywood films due to their mass appeal, easily digestible plots and special effects.

However, as China's film industry continues to develop (albeit slowly due to bureaucratic red tape and rampant piracy), there is beginning to develop a sense, and fear, that US films will dominate the industry to the detriment of local films.

The CFG is caught between a rock and a hard place. By importing mainly US films with mass appeal, it is insuring that the limited number of slots it has to import blockbusters will bring in the highest amount of revenue. However, at the same time, it opens itself to criticism that it is allowing US films to become dominant.

So, the reports actually stem from the internal policy of the CFG to lessen the number of US films let in each year in order to head off this criticism. This is not an official government policy but rather a step taken by the industry (the government backed monopoly player in the industry) to ameliorate criticism that it knows is coming.

Either way, the effect is going to be same. Less US films will be allowed in next year, but China will be able to claim that it has not imposed any quotas because it wasn't SARFT, the regulator that limited the films from the US, it was the CFG - the industry - that did so.

Of course, this news will be welcomed in Europe, a region that is widely perceived in China as having surrendered its film industry to Hollywood many years ago.