Chinese Influence Over Hollywood to Be Tested in WTO Negotiations

LOS ANGELES—China’s film market is one of the most restrictive in the world, though negotiations this month at the World Trade Organization (WTO) could open it up slightly.

China previously avoided facing a WTO complaint against its restrictive film market by raising the quota of foreign films that can be screened from 20 to 34 in a deal with the WTO in 2012. That deal expires this month and must be renegotiated.

With the United States being the main exporter of movies to China, and with Chinese investment pouring into the U.S. film industry, the United States may not settle for the status quo.

“There’s a lot of confusion,” said economist William Yu of the UCLA Anderson Forecast, an economic forecasting service associated with the UCLA Anderson School of Management.

“I believe the Trump administration will be more concerned than the previous administration regarding Chinese investment into American companies,” he said.

The WTO negotiations could have major implications, with Hollywood hungry for growth opportunities and with China set to overtake the United States as the largest film market in the world, according to international accounting firm PwC.

“Studios need money to make films,” said Los Angeles-based corporate and entertainment lawyer Jesse Weiner. “[Other] places dried up, and now the hot spot is getting money from China.”

Films that hope to be among the 34 allowed to screen in China, however, must be approved by China’s State Administration of Press, Publication, Radio, Film and Television (SAPPRFT).

The types of content that can get films rejected include positive portrayals of the United States or religion, and critiques of the Chinese Communist Party.

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Conversely, portraying the United States negatively, or glorifying the Chinese regime, can help a film secure access.

Examples of studio modifications to films range from changing the prosperous city of the future in 2012’s “Looper” from Paris to Shanghai , to promoting the Chinese regime as the protector of Hong Kong in the 2014 blockbuster “Transformers: Age of Extinction,” a China-Hollywood coproduction.

Studios can work around the 34 film cap by forming coproductions with Chinese studios and allowing Chinese censors to dictate script edits before production begins. That also gives foreign studios a 43 percent cut of the box office revenues, rather than 25 percent under the current WTO deal. The U.S. film industry hopes that percentage will increase after the current negotiations.

Red Hollywood

As Hollywood wrestles with censors, Chinese companies have poured money into the U.S. film industry.

The Dalian Wanda Group, a Chinese conglomerate that deals with everything from commercial real estate to movie theater operation, is leading the way, with more investment to come, according to chairman Wang Jianlin.

The group was in the final stages of a $1 billion deal to buy Dick Clark Productions, though The Wrap reported on Feb. 20 that insiders thought the deal was failing due to the challenges of getting the Chinese government to approve the price tag. Dick Clark productions runs the Golden Globes and the Miss America beauty pageant.

The group already owns theater chain AMC Entertainment and the Hollywood studio Legendary Entertainment. But Wang said he still wants to buy one of the six major Hollywood studios: Twentieth Century Fox, Warner Bros., Paramount Pictures, Columbia Pictures, Universal Pictures, or Walt Disney Pictures.

Chinese investment in the United States in 2016 nearly tripled over its previous record to more than $50 billion, according to a January report by the American Enterprise Institute.

Chinese companies and other investors are eager to diversify their portfolios, due to high risks in the domestic economy, said Yu.

“But if they have some kind of deeper intention rather than economic cooperation, it can be an issue,” he said, alluding to problems U.S. corporations have had with some Chinese companies stealing intellectual property or trying to exert political influence.

The Trump administration has proposed a more intense review process to address double standards applied to U.S. companies in countries like China.

That could include the way the Chinese regime heavily controls the content of U.S. films and television shows allowed inside China.

American Values

One reason the Chinese regime restricts foreign films is because it considers the proliferation of Western values to be dangerous to the Communist Party’s control over the country.

A study by Yang Gao from the Singapore Management University published in November 2016 found that Beijing University students who watched American television shows were drawn to the characters “who are truthful about their feelings and opinions.”

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“This is precisely where American television offers its cultural services: It provides a window into a set of lives that appear less controlled and less burdened,” wrote Yang.

If Chinese companies like the Wanda Group exert more control over Hollywood productions, the regime could become a much greater part of U.S. movies and television.

The biggest coproduction to date, “The Great Wall,” starring Matt Damon and produced by Legendary Entertainment, Atlas Entertainment, China’s Le Vision Pictures, and China Film Group, opened in the United States on Feb. 17.

If the Trump administration does decide to cut down further Chinese investment into Hollywood, Yu said he believes it would not harm the local economy or the entertainment industry.

“I don’t see much of an impact. They always will survive,” he said.