China's New Plan: Tax Breaks for Movie Theaters

 

This story first appeared in the March 21-28 issue of The Hollywood Reporter magazine.

China's remarkable movie boom during the past decade has been fueled by government investment in the film sector.

Now sources tell THR the government plans to introduce measures to boost the industry further, including tax breaks for real estate companies that put theaters in shopping malls. Should a developer try to replace a multiplex within a few years, it could face tax penalties and even fines, according to a source.

In 2013, 5,077 movie screens were added in China, bringing its total to nearly 18,200. (By contrast, there are about 40,000 in the U.S.) Incentives to encourage cinema construction are part of an effort by President Xi Jinping to grow the culture sector, which has been called a "pillar industry" as Beijing tries to keep expanding the Chinese economy.

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The rate of shopping mall construction in Beijing, Shanghai, Guangzhou and other tier-one cities -- already well served by shiny new theaters -- is set to cool because of measures aimed at offsetting a possible real estate bubble. But analysts believe smaller cities remain full of potential.

The government also is examining ways to consolidate the Chinese exhibition sector and slash the number of theater chains -- now about 40 -- in half. Many are owned by local governments, but their theaters are antiquated and no longer competitive.

There also are plans to encourage the use of theaters for diverse content other than movies, such as major sporting events and 3D classical music concerts.

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Chinese exhibitor Wanda, which in 2012 bought the U.S.' AMC chain, tried to show the recent Oscars telecast but reportedly failed because of technical issues with a satellite. Nonetheless, the group plans to keep attempting to broadcast events.

Of course, a new crop of screens would be good for Hollywood. Growing demand for movies from overseas contributed to China's 2012 decision to expand its annual theatrical quota for foreign films from 20 to 34. 

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