The 8 Part Playbook:How China is Taking Over the Global Film Industry

猛虎不及地頭蛇 — “The mighty dragon is no match for the native serpent”

China’s ascent in the world over the past 40 years is without precedent. They have lifted more than 850 million people out of poverty, become the world’s largest economy by purchasing power parity, largest manufacturer, merchandise trader, and holder of foreign exchange reserves, and maintained annual GDP growth at an average of nearly 10 percent, a pace the World Bank has called “the fasted sustained expansion by a major economy in history.”[1] This historic rise may just be gaining steam; since assuming the role of general secretary of the Chinese Communist Party (CCP) and president of the People’s Republic of China (PRC) in 2013, Xi Jinping has vowed to “work tirelessly to realize the Chinese Dream of national rejuvenation,”[2] setting aggressively ambitious goals for China’s growth globally. These goals are clearly outlined in China’s 13 Five-Year Plans to date, Xi’s Made in China 2025 strategy from 2015, and China’s expansive Belt and Road Initiative. To succeed, many of these goals will require China — envisioned here as the native serpent — to strategically compete with the historically mightiest of dragons — the United States.

To meet its objective of revitalized national strength, China has selected a variety of industries in which to engage in strategic competition. The past decade has seen China orchestrate concerted efforts to compete globally in industries ranging from e-Commerce and mobile payments, advanced robotics and artificial intelligence, semiconductors, aerospace engineering, automotive manufacturing, telecommunications, agricultural technology, and steel, solar, wind, tobacco, cotton, beer and coal production. An examination of China’s actions to date across several of these industries revealed a roughly common series of activities, amounting to eight different phases of effort. Together these phases can be imagined as a “playbook” for China’s strategic approach to global competition. This playbook can be traced through a variety of industries, but this paper traces the playbook through an industry rarely discussed in terms of its implications for U.S. national security, but an important component of U.S. export power — the film industry. This paper argues that in the film industry, as with any industry in which they decide to strategically compete, China is applying this playbook with the intent to become the industry’s global leader.

These eight phases can occur simultaneously or sequentially. The first phase involves the decision of CCP leadership to compete in a particular industry. In the second phase, China attracts foreign companies in this target industry seeking to operate within the Chinese domestic market, while strictly maintaining control of the access to that market. Third, China leverages the control they have on market access to force unfavorable concessions like forced intellectual property transfers or revenue sharing models from foreign companies operating in their domestic market. In the fourth phase, China learns the industry from foreign companies and capitalizes on the benefits of foreign innovation in order to improve their domestic product.

In phase five of the plan to dominate an industry, China strategically procures components of foreign competitors’ capability in order to gain additional global market access, develop technical know-how and acquire proven corporate practices. In the sixth phase, China’s government ministries enact protectionist laws and policies and provide state-backed funding for Chinese companies, allowing for unfair advantages over foreign competitors. Phase seven entails leveraging investments and lessons learned from foreign competitors in order to independently produce a competitive Chinese-made product. Finally, in phase eight, China builds on the previous steps — controlling market access while enacting protections for domestic entities, forcing unfavorable concessions while learning from and acquiring components of foreign competitors, and independently producing a competitive Chinese product — to become a — or in some cases, the — global industry leader.

The paper will consider in detail each of these eight phases as they occurred in the film industry, offering statistics, examples, and relevant authorities’ quotes as evidence. It will conclude with several key implications for the film industry. While China has yet to achieve its global goals in the film industry, in others, like the wind power industry, they’ve applied their playbook and successfully become the global leader. In the less than ten years from 2005 to 2014, China grew its share of the global wind power industry from 2 to 31%, well surpassing the United States, who in 2014, held 18% of the global market. A similar shift in the film industry could have profound implications that hit even closer to “home,” with a potential shift in the cultural landscape as we know it. Imagine a world where China leads the world in box office sales and exports smash hit blockbuster films to global audiences. In this world, U.S. movie theaters (largely owned by Chinese companies with ties to the CCP) are required to screen and promote Chinese films that promote authoritarianism, paint the PRC as the dominant global force for good, and the Western model of democracy as inept and unreliable. Based on the activities and trends detailed in the eight phases below, such a world may not be that far off.

The Film Industry

The U.S. film industry has long been extolled as a component of American soft power, once lauded by the U.S. government “as a storytelling medium that can…convey American ideals, including free expression itself, to foreign populations around the world.”[3] The significance of this role was readily apparent during the Cold War. Between 1948 and 1953 alone, U.S. film companies released seventy overtly anti-communist films.[4] Hollywood movies like Red Dawn, Spies Like Us, and Rocky IV fought and won hearts and minds. Such films helped demonstrate to “millions of Americans why communism represented the greatest threat their country had ever faced, and [sold] America’s liberal-capitalist ideas around the globe.”[5] But since the close of the Cold War, the industry’s relationship with the U.S. government has devolved to one chiefly commercial in nature, with Washington merely providing aid in countering piracy and gaining access to foreign markets.[6] This diminution in Hollywood’s role in bolstering American soft power has the potential to put at risk the U.S.’ role in protecting freedoms around expression, speech and creativity long embodied by the film industry.

The film industry is also significant to the United States in terms of its economic contributions. According to analysis published in February 2020 by the Motion Picture Association, the film and television industry supports 2.5 million jobs, pays out $181 billion in wages and $49 billion in payments to more than 280,000 local businesses across the U.S. annually.[7] The U.S. film and television industry is the largest in the world, with more than $242 billion in sales and $16.3 billion in exports in 2018 alone. U.S. film exports are 2.4 times that of U.S. imports. This positive trade balance exists in every major market in the world, representing a trade surplus larger than that of each of the telecommunications, transportation, insurance, and health related services sectors.[8] The U.S. film industry has long enjoyed domestic demand. However, steeply rising film budgets, a saturated U.S. market, plateauing theater ticket sales, and competition from streaming services, has shifted focus outward. International markets now represent the future of opportunity, and China, with its nearly 1.4 billion people, the most lusted after of all.

Through the 20th century, China’s film industry was historically viewed as an incapable and unimaginative vehicle for CCP propaganda. But today, China boasts the fastest growing film market in the world; by 2020 their box office is projected to reach $12.279 billion, exceeding the United States as the world’s largest market both in box office revenue and audience numbers.[9] China’s strategy for growth in the global film industry can be traced by the playbook it has employed, the phases of which will be discussed in detail shortly. They have seized upon the U.S. film industry’s need for capital and desire for access to its covetable population size and have applied their playbook to force U.S. complicity in their efforts to take over the industry. In doing so, the U.S. film industry’s legacy as an exporter of American creative power and the American values is at risk.

Evidence of China’s 8-Step Playbook in the Film Industry

1. Decide to strategically compete in an industry

China recognizes and has embraced the idea that in a highly globalized world, competition between great powers is not limited to economic and military competitions, but also over elements of soft power like values and culture. China’s explicit decision to compete across cultural industries first came to light in 2007 with their 17th National Congress Report. The report recognized the importance of leveraging Chinese culture to increase soft power, a message that CCP leadership has since periodically reinforced. The 2007 report identified cultural industries as a critical means “by which to achieve China’s goal of being a well-off society,” and proposed “working vigorously to develop the cultural industries, implementing a strategy led by major cultural industries projects, accelerating the construction of cultural industries bases and regional cultural industries clusters, cultivating key cultural industries enterprises and strategic investors, enriching the cultural market and enhancing international competitiveness.”[10] This decision to compete strategically in cultural industries was reinforced over the next decade. In 2009, the State Council published the “Cultural Industry Promotion Plan,” elevating the cultural industries to the level of national strategy.[11] Then in 2011, at the CCP’s Sixth Plenary Session, they provided a systematic map for the road to Chinese cultural development. The session identified the film industry as critical to China’s ambition of boosting the country’s cultural soft power. Once rising to power in 2013, Xi Jinping reaffirmed this focus, urging China to export its values, and calling upon artists and filmmakers at a 2014 symposium on culture to promote a “global creative industry.”[12]

In accordance with Xi Jinping’s goals for “national rejuvenation,” the film industry was identified as a key medium for bringing the “public opinion in alignment with the party’s ideological worldview.”[13] Subsequently, the industry was placed under the direct control of the CCP’s Central Propaganda Department (CPD) in 2017. In February 2019, China held its first national industry convention since the CPD assumed control of the National Film Bureau. At that symposium, the CPD Executive Director, Wang Xiaohui, called for China to become a “strong film power like the United States” by 2035. He set lofty targets, calling for the production of 100 films annually, each grossing more than $15 million.[14] Capturing the intent to compete for soft power globally, Xiaohui asserted that while “China has already taken its place at the center of the world stage…Chinese films must have their proper place in the world.”[15] Thus the intent was made clear, with goals established and affirmed by multiple CCP leaders: China will compete to become the leader in the global film industry.

2. Attract foreign companies seeking Chinese domestic market while maintaining strict market access control

The Chinese domestic market represents a highly attractive opportunity for U.S. film studios seeking to increase revenues globally. Over the past decade, thanks to its expanding middle class and per capita GDP, China has enjoyed a surging growth in the consumption of luxury goods — including moviegoing. The rise of China’s film industry, both in terms of total box office revenue (Figure 1),[16] and ticket sales (Figure 2),[17] reflects the evolving behavior of its consumers. In response to the swell in demand, China has frantically constructed movie theaters, building nearly 10,000 new movie screens in 2018 alone.[18]

As a result of these growth measures, China surpassed Japan as the second largest global film market in 2012. By 2018, China surged to $9.15 billion in total box office sales, second only to the U.S. with $11.08 billion, and towering over Japan with a mere $2.09 billion (Figure 3).

China has deftly leveraged the rapidly growing size of its market to draw in foreign film companies who lust after the box office potential of its vast population. As China is increasingly able to translate its sizable population into rising ticket sales, U.S. interest in tapping into such a promising market rises in synchronization. Today, the highest-grossing American films rely heavily on the Chinese market for revenue. As an example, 2019’s highest grossing film worldwide — Avengers: Endgame — saw nearly 22% of its global revenue come from the Chinese market, bested only by the U.S. domestic market which accounted for 30% of sales.[19] The opportunity for revenue growth presented by China, combined with the flatlining of the domestic U.S. box office sales, the threat posed by digital streaming options, and ever-rising budgets of Hollywood films, has left American film companies desperate for sustained access to China’s market.

China further drives demand for reaching its domestic market by restricting market access through its stringent foreign film quota. Beginning in 1994, China has permitted foreign films to be shown in its domestic theaters on a revenue sharing basis, known as fenzhang pian (分账片). However, they strictly limit the number of foreign films allowed to be screened in China annually.[20] When they joined the World Trade Organization (WTO) in 2001, China raised the quota of foreign films allowed from 10 to 20, agreeing to raise it to 50 films annually by 2005.[21] However, China failed to meet its 2005 deadline, and in 2009, a WTO panel found the 20 film limit in violation of China’s WTO commitments.[22] After more than a decade of noncompliance, China made a deal with the United States in 2012 to temporarily suspend further U.S. WTO actions against China’s film importation policies. In exchange, China agreed to raise the quota to 34 films where it has remained since — still short of the 50 agreed upon when joining the WTO.[23] This quota is in stark contrast to the policies of the U.S. and Japan (the first and third largest global film markets, respectively), where there are no limits to the number of foreign films allowed to be shown each year and market access remains largely open to all.

3. Leverage control of market access to force concessions from foreign companies operating in domestic Chinese market

The careful limitations put on foreign companies trying to access China’s domestic market coupled with the U.S.’ growing dependence on Chinese box office sales drives up demand for market access. This surplus in demand provides Beijing with increased leverage when negotiating with foreign film companies. China capitalizes on their advantageous bargaining position to compel concessions from American studios seeking to operate within its borders. Some of these concessions are financial in nature. U.S. companies whose films are to be shown in Chinese theaters must accept a non-negotiable revenue-sharing rate of 25%, with China pocketing the remaining 75% of revenue. This rate pales in comparison to the 50% foreign studios take home when their films screen in the U.S., and the 40% the U.S. enjoys when their films screen in most other foreign markets.[24] Yet the most alarming of concessions come in the form of modifications to films’ content to meet China’s onerous censorship requirements.

In a report published in 2015, the U.S.-China Economic and Security Review Commission (USCC) found that “the breadth of China’s censorship efforts, its political and international sensitivities, and the caprice of its regulatory system together impose a powerful chilling effect on [U.S.] movie studios…Hollywood’s efforts to comply with the demands of Chinese officials afford China disproportionate leverage over the production of American film.”[25] Hollywood has been negotiating with foreign censors since it first began exporting films 100 years ago. However, modifications to films were modest since other democratic countries have historically been the most profitable markets for U.S. films. But since China screened its first American movie in 1994, limitations imposed by Chinese censors have only tightened. This arduous vetting process is a reflection of the Mao Zedong dictate that “[Chinese] art serve politics” and that film, like other artistic mediums, is a method for social control — a CCP position reaffirmed by Xi Jinping.[26] Today, every film screened in China must be vetted by the CCP’s Central Propaganda Department, and depending on its subject matter, potentially by the Ministry of State Security, the State Ethnic Affairs Commission, the Ministry of Public Security, the State Bureau of Religious Affairs, the Ministry of Education, the Ministry of Justice, the Ministry of Foreign Affairs, and a variety of other governmental agencies.[27]

All creative endeavors involving China, to include American-made films to be released in the Chinese market, must meet the CCP’s goals of media influence. These three goals include: (1) promote a positive view of China and benign perspective of the CCP’s authoritarian regime, (2) encourage foreign investment in China and openness to Chinese investment abroad, and (3) marginalize, demonize, or suppress anti-CCP voices, incisive political commentary, and exposés that present the Chinese government and its leaders in a negative light. [28]

Accordingly, Hollywood filmmakers are required to cut out any scenes, dialogue, and themes that may be perceived as a slight to the Chinese government, however small. This means no Chinese villains, no mention of the South China Seas or of Tibetan independence, no crime or illicit activity within China’s borders, no disparagement of the PLA, no damage to Chinese sites or monuments, and nothing that might portray China as a developing country, or anyone Chinese portrayed as incapable of defending themselves. [29] With an eye toward distribution in China, American filmmakers increasingly edit films according to these standards in anticipation of Chinese censors’ many potential sensitivities (see Table A below for a sampling of recent examples). Such restrictions pose a difficult choice for American filmmakers: tailor content for China at the expense of free expression of the filmmaker’s vision or lose billions of dollars in potential revenue if denied screening in the Chinese market.

Some American film studios are no longer waiting for Chinese censors to demand changes but are beginning to censor themselves. Anticipating what Chinese regulators will object to, U.S. filmmakers are writing scripts and altering films that self-censor before production is complete in hopes of expediting the screening process. Some go as far as intentionally creating for Chinese tastes, adding Chinese locations, actors, and plot lines in an effort to appeal to potential Chinese audiences and score bonus points with the Central Propaganda Department (see Table B for a selection of such instances).

The willingness of the major U.S. film production companies to adapt to China’s strict censorship is clear: of the 60 films that represent the world’s top 10 highest grossing films annually from 2016–2019, 59 were American-made, and 55 of those passed the CCP’s censorship requirements and were screened for Chinese audiences. Those denied screening in China for failing to adhere to censorship guidelines missed out on the lucrative box office revenues that a Chinese audience nearly guarantees (see Table C for examples of U.S. films that failed to meet censorship requirements).

4. Learn from foreign companies and capitalize on benefits of foreign innovation

China has a reputation of being an imitator, not an innovator, when it comes to production. Particularly in the film industry, China has traditionally lacked both the talent and technology to produce box office hits on par with the U.S. At China’s 2018 Hainan International Film Festival, experts identified that “China currently did not possess sufficient international, versatile, and craftsman-type talents to meet film industry needs, but this deficiency gradually was being overcome.” [30] To compensate for the lack of ingenuity and experience in producing hit films, Chinese companies have recruited and hired seasoned American filmmakers to bring their talents to China. In 2018, Legendary Entertainment, owned by China’s Dalian Wanda Group, brought in former Sony Pictures executive Jiang Wei to head its China unit. Chinese actor and director Wu Jing hired celebrated stunt coordinator Sam Hargrave (of Avengers: Infinity War acclaim) for the making of Wolf Warrior 2, China’s highest grossing film in history. China’s Hanhai studio named Rob Cain, a 25-year American film production and finance veteran, and Janet Yang, Golden Globe- and Emmy Award-winning producer as Senior Producers. Alibaba Pictures appointed Director Renny Harling (of Die Hard 2 and Cliffhanger) to take lead on new films they finance. Chinese tech conglomerate LeEco brought in former head of Paramount Pictures, Adam Goodman, to direct its English-language film operations. The list goes on.

Chinese film companies have also sought to close the gap in learning and experience by devising partnerships with U.S. film studios. American companies have proved surprisingly willing to lend their honed cinematic expertise to teach and train their Chinese competitors just how a box office hit gets made. In an interview with China Real Time, Joe Russo, Director of Marvel’s Captain America franchise, proffered that he intends to help Chinese filmmakers “make a movie correctly” based on his many years of experience.[31] In 2017, Steven Spielberg announced he would be partnering with China’s Alibaba to help produce, distribute and finance films globally. The partnership would grant his Chinese partners the opportunity the learn intimately from Hollywood’s top-grossing director. [32] The Weinstein Company followed a similar path, agreeing to coproduce with China’s Dalian Wanda Group. According to Weinstein’s former COO David Glasser, Wanda Group “were on set and involved in production, postproduction, marketing, everything” because “they wanted to learn how we do what we do.”[33] Meanwhile, director James Cameron, of Avatar and Titantic fame, provided China’s Tianjin North Film Group and Tianjin Hi-Tech Holding Group with his sophisticated 3D filming technology. While Cameron provided instructions for shooting cost-effective 3D sequences,[34] DreamWorks Animation taught their Chinese counterparts at Oriental DreamWorks new animation technologies, and painting, sculpting, and acting techniques.[35] As Yu Dong, an executive at Bona Film Group (China’s largest independent film studio) explained, “everything we learned, we learned from Hollywood.”[36]

5. Acquire components of foreign competitors’ capability

In the film industry, China has seized on one of the quickest ways to gain market share and to learn from the best in the business — acquire components of your competitor’s supply chain. In addition to recruiting and hiring competitors’ talent as detailed above, journalist Joji Sakurai explains that, “China…has been on a Hollywood shopping spree abroad, with players such as Wanda, Alibaba and Tencent snapping up studios, investing in production companies, creating global distribution chains and bankrolling blockbusters.”[37] Chinese firms have aggressively pursued acquisitions of American owned film production companies and movie theater chains in particular. While these two components of the film industry (one involved in filmmaking, one in film screening) differ in the potential degrees of control and influence they may provide, both are possible causes for concern.

In 2012, Dalian Wanda Group (owned by former People’s Liberation Army Commander and China’s richest man at the time, Wang Jianlin) acquired AMC Entertainment, the largest movie theater chain in the world. In 2016, Dalian Wanda Group then bought Legendary Entertainment Studio, producer of Jurassic World and the Dark Knight trilogy. (In a separate transaction they also acquired Dick Clark Productions, the company behind the Golden Globes, American Music Awards and “New Years’ Rockin’ Eve”). Also in 2016, Chinese manufacturing firm Anhui Xinke New Materials acquired an 80% stake in Midnight Investments that owns Voltage Pictures, the firm behind Academy Award Winning Best Pictures The Hurt Locker and Dallas Buyers Club. In 2017, Shenzhen-based Recon Holding acquired a 51% stake in Millennium Films, the company behind The Expendables series and that has an extensive classic catalog, including Rambo. These acquisitions provided a fast-track to market share, but even more important for China — the access to the tools, resources, technology and expertise of industry veterans that could have taken decades to cultivate themselves.

6. Enact advantageous protections and provide state-backed funding for domestic Chinese companies

While Chinese companies have done their part to learn from experts, capitalize on others’ innovations, and acquire components of their competitors, the Chinese government has contributed by enacting advantageous protections and state-backed funding for China’s studios producing films domestically. The most obvious protection comes by way of the aforementioned quota restriction on imported features films, a restriction intended to prevent foreign films from monopolizing China’s domestic market. China’s Central Propaganda Department additionally imposes a two-week ban on all foreign films during the country’s two high seasons — Lunar New Year and the summer months. This ban on imported films during the most popular times for Chinese families to frequent movie theaters in China — officially called “domestic film protection periods” — helps propel box office sales for domestically produced Chinese films.[38]

Similar efforts to manipulate the box office occur via the Chinese government’s control of release dates for foreign films. The CPD has notoriously timed the release of several big-budget American films, typically of the same genre, in order to place them in direct competition. As an example, The Dark Knight Rises and The Amazing Spider-Man, although released nearly three weeks apart in the U.S., were released on the same day in China, cannibalizing each other’s box office sales. The CPD has also been known to hold off the release of big-name American films in order to boost ticket sales and the perception of growing popularity of Chinese films. The release of Pixels, Inside Out, and Minions were all postponed so that China’s Monster Hunt could continue its box office run absent U.S. competition.[39] The release of Hunger Games: Mockingjay Part 1 was postponed to ensure the success of China’s The Crossing and Gone with the Bullets. The CPD has even gone as far as outright box office fraud, working with Chinese theaters to falsely input ticket sales to benefit state-produced films. In 2015, Chinese moviegoers that had paid to see the American film Terminator: Genisys complained about receiving tickets instead to see The Hundred Regiments Offensive, a nationalistic film distributed by the Propaganda Department’s own China Film Group.[40]

China’s CPD presents further advantages for domestic Chinese film companies through financial incentives. The Department provides paid compensation for films that support Chinese government-sanctioned ideals. For instance, the film studio behind China’s Full Circle received a $500,000 bonus from the government’s film oversight body for promoting filial piety — a key virtue in Confucian society.[41] In 2012, China’s National film industry development funds management committee published supportive schemes for domestic film companies and theaters, promising to return funds paid by Chinese film producers and theaters if domestic films performed well at the box office. The committee offered production companies subsidies for high-tech format video creation, and to theaters for installing digital projection equipment.[42] In 2014, the CCP pledged more than 1 billion yuan annually to support the domestic film industry by contributing funds to film production and theater construction. The commitment by China’s government agencies to promote domestic films helps set the stage for Chinese film studios to eventually produce global box office hits of their own.

7. Leverage acquisitions and lessons learned from competitors to independently produce domestic product

In an effort to meet the Central Propaganda Department’s goals for PRC film production, Chinese studios have been aggressively releasing movies domestically. Over the past two decades, China has leveraged investments made in their own film studios, acquisitions of foreign capabilities, and lessons learned from recruited talent and technological innovations of foreign competitors to produce a rapidly increasingly number of films. In 2000, China released just 91 films. By 2016, China surpassed the United States in total number of films produced annually (second only to India), a position they have held since. By 2018, China had increased the number of films they released tenfold from their output in 2000, releasing 902 films. To keep up with the surge in production and domestic demand, China continues to rapidly construct movie theaters, boasting nearly 70,000 cinema screens to date.

China’s films have not only surged in quantity over the past twenty years, but in box office performance. In the Chinese market, domestically-produced films are becoming nearly as profitable as American-made ones, with Chinese-made films continuing to climb in revenue as foreign film revenues have plateaued (as shown in Figure 4). Today, the three highest grossest films of all time in China are something once considered unthinkable for a market that devoured American films — they are Chinese. In 2019, only two American films made in onto the list of top ten grossing movies in China (claiming spots eight and nine) — half the number on the list in recent years.

Globally, between 2000 and 2013, only five of the top 20 films released each year were produced or co-produced by China. But since 2014, China has financially backed 29 blockbuster hits that ranked in the top 20 at the global box office their respective year of release. Contrary to the traditionally held belief that China is unable to produce films that appeal to international audiences, the overseas box office revenue of Chinese-produced movies has steadily increased since 2012 (see Figure 5).

China has also invested heavily in their own production facilities. These state-of-the-art compounds seek to attract filmmakers from abroad, eager to take advantage of the reduced costs and red tape of filming in China. China hosts the largest outdoor film studio in the world — Hengdian World Studios — which is bigger than Paramount and Universal Studios put together and where 30 film shoots occur each day. Fittingly, the owner of the compound, Xi Yong’an, explained, “I want to sell Chinese culture to the world.” [43] Dalian Wanda Group’s $8.2 billion film studio in Qiangdao, China offers a 40% cash rebate for all foreign and local films and television shows that use their facilities. The studio proudly displays a white sign from atop a hill that reads “Movie Metropolis of the East” letters in the familiar style of the beloved Hollywood sign. Given the soaring output volume, box office performance, and attractiveness of the Chinese domestic film industry, “China is exhibiting signs of becoming India or Nigeria, two large moviegoing markets whose film ecosystem thrives independently of Hollywood.”[44] But the PRC has its sights set higher than that.

8. Become a — preferably, the — global industry leader

As the fastest growing film market in the world, China is well on its way to becoming the global industry leader in terms of box office revenue generated annually. Hollywood’s share of China’s box office revenues has been dwindling, with American-made films accounting for 32% of total sales in China in 2017, down from 49% in 2012. A similar trend is occurring on the global stage. At the close of 2019, total box office revenue (combination of all domestic ticket sales and global revenues from domestically-made films) for China reached $9.2 billion. This figure that totals more than the next six markets combined. Although still second to the U.S.’ $12 billion in annual sales, China closes the gap on the U.S.’ lead markedly each year. Reports published by Deloitte and Price PricewaterhouseCoopers (PwC) both peg 2020 as the year China overtakes the United States in both total box office revenue (as depicted in Figure 6) and total audience numbers, with China forecasted to take in more than $15 billion in revenue by 2023.[45]

But leaders of the Chinese Communist Party maintain ambitions beyond cornering market share — they are pushing for the film industry to become a leader in terms of influence and reputation. Since the elevation of cultural industries to the level of national strategy in 2009, Chinese leaders have reinforced the importance of increasing the soft power of Chinese culture. In Wang Xiohui’s speech at China’s 2019 national film industry convention, he outlined his vision for Chinese filmmakers who he said should maintain “a clear ideological bottom line.” He stated that China must produce films that “equally generate social impact and financial profits,” have themes that promote “the Chinese dream of the great rejuvenation of the Chinese nation,” and have “patriotic plots.”[46] Though he acknowledged that China’s global box office performance had already turned them into a “big film power,” he conveyed that economic performance was not enough — China needed to remain focused on becoming a “strong film power” like the US by 2035.[47] Whether China achieves its goals of becoming the largest global box office and an influential leader in the global film industry like the United States remains to be seen.

Implications

If China achieves its goal of becoming a leading power in the film industry, there are important implications for U.S. filmmakers and the film industry globally. As any mounting power with global ambitions would, China aims to increase its influence across multiple lines of effort with the intent of reshaping the international landscape in a way that is more aligned with its own economic interests, values, and worldview. Three implications of China’s pursuit for reclaiming its place as a global culture leader are considered below, including (1) the effects of “brain drain” and economic impacts of a declining U.S. film industry, (2) the potential reshaping of global standards more in line with China’s ideology and objectives, and (3) the further, and perhaps irrecoverable, erosion of American soft power.

As detailed in phases four and seven, Chinese companies, with the support of the Chinese government, have built an attractive film production ecosystem that has enticed American film talent to take their services to the PRC. In an interview with China Real Time in Beijing, the director of Marvel’s Captain America franchise, Joe Russo, explained that a growing number of Hollywood film makers are coming to China “for both economic and artistic reasons,” viewing China as an explosive market providing “absolutely another option for filmmakers.”[48] In addition to attracting producers and directors, the opportunities offered in the Chinese market are also increasingly siphoning below-the-line workers, such as cinematographers, composers, visual-effect supervisors and action coordinators. This brain drain posed by American film workers departing the U.S. market and taking their talents overseas will make finding and recruiting talent to support U.S. films more challenging. Additionally, American production companies taking projects to more affordable and expansive Chinese film studios pulls business away from U.S. studios that depend on revenue generated from film production to survive. If Chinese film production standards follows trends in automobile and smartphone production, the costs of production will continue to lower and undercut U.S. pricing, driving wages down for the industry worldwide. At stake if the American film industry loses its position as the leading exporter of films globally is roughly 4% of all U.S. trade surplus in services, 1.2% of U.S. GDP, 2.5 million jobs, and 93,000 businesses across all 50 states.

China’s increasingly strong presence in the global film industry goes beyond economic effect — there are implications for what this might mean for cultural influence, a form of soft power. In “China’s Vision for a New World Order,” Nadège Rolland explains that “like all fast-rising powers, the People’s Republic of China seeks to reshape the international system in a way that reflects both its values and interests, aligning institutions and norms according to its own world view and to serve its own purposes.”[49] In the film industry, this could mean taking an increasingly ambitious approach to censorship and content shaping. It could mean insisting that films made for a global audience paint China in a positive light only, and that subtly promote authoritarianism and denounce pro-Democratic narratives that may portray Western predominance. When Wang Jianlin acquired the AMC movie theater chain in 2012, he stated his desire to use his U.S. theaters to showcase Chinese films. How long might it take until U.S. theaters are required to screen and showcase Chinese made movies that legitimize the CCP, push pro-autocratic messaging and promote Chinese benevolence as the global force for good? Ms. Rolland continues that China’s vision is driven by the pursuit of discourse power, in part “a country’s ability to make international actors accept — or at a minimum, not oppose — its own ideology, values, and objectives.”[50] What better way to do this than to appeal to citizens around the world with well-financed, exciting films in exotic locations that portray the PRC and communism as a force for good while Western powers are inept and unreliable? If you think this is a stretch, just watch China’s 2017 smash hit Wolf Warrior 2.

American popular culture, largely through Hollywood and its films, has been a source of U.S. soft power for decades. Just consider the impact movies like Firefox, Red Dawn, Top Gun, Rocky IV, and Rambo III had during the Cold War, or that hits like Apollo 13, Independence Day, Titanic, Saving Private Ryan, The Patriot, Miracle, Lincoln and Zero Dark Thirty have had in the decades since. A common narrative running through each of these films in one way or another is about the strength of Americans, and the ideals of the American way of life. But as pointed out in Small Wars Journal, as China gains greater control as an influencer in the global entertainment industry, “China threatens to nullify this advantage and even turn it against U.S. interests.”[51] We have already allowed the CCP to impinge on creative freedom and free speech by acquiescing to their censorship standards when pursuing a Chinese market release for an American film. We’ve allowed Chinese companies to purchase our largest movie theater chain, our entertainment industry award shows, and some of our prized film production companies. We’ve continued to accept an unfavorable revenue-sharing model, and a cap on foreign film screenings that has violated China’s WTO agreements for nearly 20 years. We accept Chinese funding to help produce some of our biggest box office hits, despite the ties the money surely has to the CCP. Where is the line drawn in an effort to curtail the PRC’s incursion into the American entertainment industry? This acquiescence to a Communist state’s rulebook is alarming in terms of its implications for American soft power and the U.S.’ role in protecting freedoms around expression, speech, and creativity long embodied by the film industry. As Ms. Rolland so aptly stated, “at stake is not only the predominant position of the U.S. in the current system but more importantly the potential erosion of fundamental human rights, freedom of thought and expression, and self-government around the world.”[52]

China’s growing share of the international film market presents both challenges and opportunities to the United States and those countries that wish to see a more free and fair global film industry. In order to combat such challenges and pursue such opportunities, leaders within U.S. film companies and respective U.S. oversight agencies need to conduct a clear-eyed assessment of the implications of a Chinese-led global film market, envisioning what the industry might look like if dominated by PRC influence. These leaders, along with international allies and partners, must take a proactive approach in communicating the stark contrasts between what norms shaped by Beijing versus norms shaped by Western nations might mean for film production worldwide. To retain its soft power influence and leadership in the global film industry, the United States must do a better job of offering a contrasting vision of what filmmaking looks like — one that is without coercion and censorship, that respects sovereignty and human rights, is open to free flow of ideas and protects freedoms around speech, and that is economically sound for all parties.

References

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[6] Bayles, “Hollywood’s Great Leap Backward on Free Expression.”

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[41] The Economist, “The red carpet.”

[42] Xiang and Walker, “China Cultural and Creative Industries Reports 2013,” 12.

[43] Beech, “How China Is Remaking the Global Film Industry.”

[44] Steven Zeitchik, “The Chinese film business is doing the unthinkable: Thriving without Hollywood,” Washington Post, December 30, 2019, https://www.washingtonpost.com/business/2019/12/30/chinese-film-business-is-doing-unthinkable-thriving-without-hollywood/.

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[47] Davis, “China Aims to Become ‘Strong Film Power’ Like U.S. by 2035, Calls for More Patriotic Films.”

[48] Lin, “China’s Movie Industry is the New Hollywood, Some Top Filmmakers Say.”

[49] Nadège Rolland, “China’s Vision for a New World Order,” The National Bureau of Asian Research, January 27, 2020, https://www.nbr.org/publication/chinas-vision-for-a-new-world-order/.

[50] Rolland, “China’s Vision for a New World Order.”

[51] Darren E. Tromblay, “No More Fun and Games: How China’s Acquisition of U.S. Media Entities Threatens America’s National Security,” Small Wars Journal, https://smallwarsjournal.com/jrnl/art/no-more-fun-and-games-how-china%E2%80%99s-acquisition-of-us-media-entities-threatens-america%E2%80%99s-nati.

[52] Rolland, “China’s Vision for a New World Order.”