China Adopts Film Law, With Mixed Implications for Hollywood

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The law has stiff penalties for box-office fraud and piracy, which Hollywood will cheer, but also vaguely worded rules designed to stifle negative statements about China.

China's top legislature has passed the first law governing the country's fast-growing film industry, the official Xinhua news agency reported late Monday.

The formal approval of the legislation comes after several phases of semi-public review, and the final version appears to contain few surprises.

There are provisions that will be welcomed by Hollywood — such as harsh penalties for box-office fraud and film piracy — as well as others that could be cause for concern, like a vaguely worded guideline restricting collaboration with overseas studios or individuals that are deemed to have "damaged China's national dignity."

The law also states that local theater operators "should ensure that domestic [Chinese] films' screening time is no less than two thirds of the annual screening time of all films," according to Xinhua. The guideline appears to be a new layer of market protection in addition to China's existing quota on foreign film imports, which has traditionally restricted the China market to just 34 international movies per year on revenue-sharing terms. 

Many believe that ticket fraud in recent years is one of the contributing factors to the dramatic slowdown in China's box-office growth this year. In 2015, ticket sales revenue expanded by 49 percent, but as of October, 2016 growth had narrowed to just 4.7 percent.

In March, China's media watchdog suspended the license of a local distributor that was caught pumping up box-office figures for Hong Kong-Chinese action movie Ip Man 3

Under the new law, in addition to license suspensions, film distributors and theaters can have all of their illegal revenue confiscated and be fined upwards of 500,000 yuan (just short of $75,000) if they falsify ticket sales data. If their illegal revenue exceeds 500,000 yuan, the fine will be up to five times the illegitimate revenue.

The provisions concerning content and overseas collaboration are more vaguely worded. The law stipulates that Chinese film should "serve the people and socialism," Xinhua said. Another guideline rules that "overseas organizations or individuals that have been involved in activities that damage the dignity, honor and interests of the country and harm social stability shall not be worked with."

In order to secure access to China's growing film market, which is expected to top North America's in 2018, Hollywood studios already self-censor their biggest tentpole releases to ensure that they do not contain story elements that might offend Chinese political sensibilities. Any negative portrayal of the Chinese state or even a passing mention of Taiwanese or Tibetan independence, for example, are no-gos. But the wording of the new guideline appears designed to provide a legal basis for banning overseas studios or individuals from engaging in the Chinese industry even if they make a statement that is politically taboo, from the Chinese government's perspective, somewhere overseas, outside of China's immediate sphere altogether. 

As a matter of practice, this phenomenon has existed for some time. Earlier this year, a Taiwanese star was dropped from the lead role of an Alibaba-backed picture after Chinese internet users alleged that he had voiced support for Taiwanese independence — even though no evidence of such statements from the actor was ever provided. Brad Pitt was considered a persona non grata in China for over a decade after his appearance in Seven Years in Tibet in 1997.

On the domestic industry front, the law states that no local film should contain content that "jeopardizes national unity, sovereignty and territorial integrity"; releases national secrets; endangers state security; damages national dignity, honor and interests; or advocates terrorism and extremism, Xinhua said. 

In a move advocated for by local film companies, the law gives provincial-level governments the power to censor movies — not just the central government — and cuts several approval steps. These changes are expected to streamline the process of moving a project from development to production for Chinese studios.

But in a more ominous turn, the law also takes a hard line on misbehaving local actors and other professionals engaged in the film business, requiring that they be "excellent in both moral integrity and film art, maintain self-discipline and build a positive public image." Explaining this portion of the legislation, Xinhua said, "the past few years have seen a string of arrests of high-profile film celebrities involved in drug abuse and prostitution." China's media watchdog, the State Administration of Press, Publication, Radio, Film and Television, is establishing a "professional ethics committee" aimed at guiding organizations and people in the radio, film and media circles to practice "core socialist values," the news agency added. 

The law also introduces several measures designed to directly fuel the film industry's growth. The central government will increase investment in the film industry and reduce taxation, according to Xinhua. The law also encourages financial institutions to offer financing services and loans for the industry's development. And it urges local governments to ensure land supply for more movie theater construction. 

China's movie screen count has grown by 7,700 screens since 2015 to hit nearly 40,000 screens in commercial operation, Xinhua said. That's roughly equal to the number in North America. 

Notably absent from the new law is the creation of a movie ratings system, a provision many in the Chinese industry have wanted for years. The law leaves in place the censorship system that requires all approved films to be appropriate for viewers of all ages. 

The new film law will go into effect on March 1, 2017, and authorities will provide a public briefing on its provisions sometime before that, Xinhua added.