China's Quota on Hollywood Film Imports Set to Expand, State Media Says

China Tap Illo - THR - H 2017
Illustration by: Kevin Hong

After an "extremely cordial" call between President Trump and Chinese leader Xi Jinping, a government-backed news outlet projected an expansion to China's film quota and a greater share of box-office revenue for Hollywood studios.

China is expected to expand its quota on foreign film imports and allow Hollywood a greater share of box-office revenue after government officials and industry representatives from China and the U.S. meet to renegotiate trade terms later this month, China's state media reported Friday.

The Global Times, an influential state-backed newspaper, predicted that a dozen more films will be added to the quota, citing local industry experts. The outlet also forecast that the share of box-office revenue that U.S. distributors are entitled to take will move from the current 25 percent toward the international average of 40 percent, "although it might not be as large as the previous 12 percentage points increase," Huang Guofeng, an analyst from Beijing-based consultancy Analysys International, allowed. 

Known for its populist tone and pro-government slant, The Global Times occasionally is viewed as a bellwether for policy direction. The article also was carried in the English edition of the People's Daily, the official newspaper of the Chinese Communist Party.

The timing of the state-affiliated analysis could be significant, given that President Donald Trump and Chinese leader Xi Jinping spoke by telephone on Thursday. According to the White House, Trump offered Xi an affirmation of the "One China" policy, which has served as the basis of Sino-U.S. relations for a generation. Trump rattled the U.S.-China relationship in January by publicly questioning whether it was necessary to honor the policy. The call is believed to have smoothed relations considerably — at least temporarily. The White House described the conversation as "extremely cordial," and Xi is understood to have told Trump that China is willing to strengthen cooperation with the U.S. in several areas, including trade and investment.

China employs various means to protect its growing domestic film industry from Hollywood domination. The most notorious measure is the strict quota limiting the number of foreign movies allowed into the local market on revenue-sharing terms.

Under the current five-year deal, which was signed by former vice president Joe Biden and Chinese president Xi Jinping in February 2012, China accepts 34 overseas films per year, with 14 of the titles required to be 3D or large-format movies. 

The landmark 2012 agreement temporarily resolved a bitter trade dispute, which had involved Washington filing an official complaint with the World Trade Organization alleging that China unfairly restricted access to its market. Previously, China had allowed just 20 imported films and foreign distributors got only 13 percent of revenue.  

Industry figures on both sides of the Pacific have been expecting liberalization to continue when the existing accord expires. At the World Economic Forum in Davos last month, consummate insider Li Ruigang, head of powerhouse investment firm China Media Capital, said he could see the quota jumping to as high as "50, 60 or even 70 U.S. films." 

China's film regulators offered some encouraging hints of relaxation in late 2016. In an effort to counteract a downturn at the local box office, regulators packed the December release schedule with additional Hollywood films, bringing the year's total to 39 imported titles instead of 34. Regulators classified the extra releases as special "cultural exchange projects," denying that the usual limit had been breached — but most analysts viewed the move as a modest de facto expansion of the quota.