China Escalates Crackdown on Celebrity Pay

Beijing may soon get its wish of steeply reducing the pay earned by China’s biggest movie stars, booming market forces be damned.

China’s largest video sites iQiyi, Youku and Tencent Video signed a joint pledge over the weekend promising to limit the pay of television actors to a maximum of 1 million yuan ($145,000) per episode and 50 million yuan ($7.25 million) for an entire season, regardless of its length.

The document also stated that signees would follow a recent government directive designed to sharply curtail the remuneration of movie stars. The new guidelines, issued by China’s media regulator in June, stipulate that the total pay for a movie’s cast should not exceed 40 percent of the budget and that individual actors cannot take home more than 70 percent of the total pay that goes to the cast.

Six prominent TV production companies — including New Classic Media, Ciwen Media and Huace Media — were among the initial signees of the joint statement. But by the end of the weekend, dozens more Chinese production studios had joined the pledge. The signees now include such leading companies as Huayi Brothers Media, Bona Film Group, Jackie Chan’s Talent International and Le Vision, along with lesser known outfits based across the country.

The changes follow the very public tax evasion scandal that engulfed the Chinese entertainment industry earlier this summer, when a prominent TV host leaked documents demonstrating an alleged tax-dodge scheme by an unnamed major star. The materials were said to reveal the widely used practice of “yin-yang contracting,” whereby production companies provide actors with two sets of pay contracts: one small one to submit to the tax authorities, and a second revealing the star’s much larger true pay.

The public outcry that followed the leaks prompted China’s tax authorities to launch a series of investigations. On Monday, The South China Morning Post, citing several unnamed sources, reported that the inquiry had been expanded into a coordinated crackdown on both tax evasion and offshore money transfers by Chinese celebrities. The authorities have also widened their net beyond film and TV stars and are now looking into the pay and international money transfers of models, sports stars and other famous personalities, it said.

Analysts say the crackdown jives with several government priorities: a general tightening of the tax system, the suppression of capital flight offshore and the ongoing crackdown on public displays of decadence and conspicuous consumption launched by Xi Jinping’s administration in 2012. 

The new promise from China’s top video services and movie studios to march along with the orders has prompted a mixed response from industry figures. Some have voiced skepticism that government-mandated pay caps can be an effective mechanism in China’s fast-growing commercial entertainment industry.

China’s box office has grown by an average annual rate of more than 25 percent for over a decade, and ticket sales jumped 16 percent in the first half of 2018.

“Imagine if Trump cut the pay of Beyonce, Kobe Bryant and Tom Cruise,” wrote one film executive in a private post to followers on WeChat. “Soon there would be a lot less cultural output from Hollywood and fewer revenue for the government to tax.”

Many others in the industry have expressed support for the agreement, however, arguing that the high fees demanded by Chinese stars had gotten out of control and made casting unduly onerous.

The growth of the Chinese entertainment market — where the box office has tripled in size over the past five years — has led to an explosion of opportunity and a dearth of pedigreed talent to meet the new demand. With the industry short on both established A-list actors and experienced producers capable of packaging projects for new names, a feeding frenzy-like atmosphere emerged around proved stars, as China’s legions of neophyte film bosses looked to lock down names that could give their investors confidence. Film producers also have had to compete for actors’ time amid an increase in high-paying advertising spots and lucrative reality TV appearances. 

Prior to the new pact, pay for A-list stars was known to commonly eat up as much as 50-80 percent of a film’s full production budget. Beijing News estimated in a report Sunday that more than 50 Chinese TV stars could expect to see their pay reduced as the new caps go into effect. 

Actress Fan Bingbing, widely touted as China’s highest-paid female star, has been dogged all summer by reports claiming that she was the actor in question in the original June leak. Fan — best known in Hollywood as Blink in X-Men: Days of Future Past and her upcoming lead role in Jessica Chastain’s action film 355 — forcefully denied the allegations; but an ongoing three-week absence of activity on her official social media accounts prompted reports in the Hong Kong tabloids that she had been hit with a three-year government ban from acting. Her name also reportedly has been removed from the promotional materials on the upcoming Chinese war film Unbreakable Spirit, co-starring Bruce Willis and Adrien Brody.

Despite a strong summer at the Chinese box office, an uneasy mood has gripped entertainment industry investors since June. Shares in China’s 11 publicly listed movie studios have plunged by an average of 17.9 percent over the month-plus since the imbroglio began, according to an estimate from the SCMP.