China’s import quotas poised for increase

Film Business Asia

By Patrick Frater

Wed, 02 March 2011, 14:38 PM (HKT)

Policy/Legal News

China is expected to loosen its quotas on the import of foreign films, but it may not change the duopoly control of theatrical distribution.

That was the advice given this morning by Mason Xu (許亮), chief financial officer of film distributor Bona Group (博納影業集團), in a conference call with financial analysts and journalists. China has until 19 March 2011 to comply with a ruling by the World Trade Organisation (WTO) that it must open its domestic markets to foreign content and distributors.

Xu’s remarks appear to suggest that state regulators may bring in changes, but not go as far as had been sought by the US trade authorities, which initiated the WTO action.

“In the past few weeks we’ve talked to [Chinese] government officials and the latest update is that the market is going to be liberalised by raising the quota in imported films. In terms of Hollywood blockbusters we’re going to see, most probably, more than thirty films [per year] to be imported into China,” he said in response to a question from a Merrill Lynch analyst. “But on the other hand the private business owners, the right to distribute the imported films, the Hollywood blockbusters, remains with the two [state-owned] players China Film Group (中國電影集團公司) and Huaxia Film Distribution. No other participants are allowed to take part in the distribution of these titles.”

Xu went on to say that raising the quota for revenue sharing films from its current 20 per year limit will not have any significant impact on the share of the theatrical box office market occupied by local Chinese films. Local titles accounted for 55% of Chinese box office revenues in 2009 and 56% in 2010, he said.

In its decision in August 2009 the WTO ruled that, by requiring imported media products to be distributed through Chinese state-owned enterprises, China breaks the commitments to free trade that it signed up to in 2001. The WTO did not overturn China’s quotas on film imports.

China appealed against the ruling, but in December 2009 a WTO panel rejected China’s appeal and set the 19 March 2011 deadline for compliance. At the time, US Trade Representative Ron Kirk characterised the ruling as “a big win” for American companies. Since then there have been indications that China may not be ready to comply with the deadline.

Addressing press and industry at the Beijing Screenings (北京放映目錄) last September La Peikang (喇培康), deputy director general of the Film Bureau, said “the film law cannot come as fast as March.”

The Film Bureau has been drafting a wide-ranging new set of regulations for the film industry known as the China Movie Industry Promotion Law. La said that it was unlikely that this will be completed in time to be sent for approval by China’s parliament, the National People’s Congress, which meets from this week.

China’s theatrical box office market grew by some 55% last year to hit $1.5 billion.