The draw of the silver screen has never been stronger. In 2018, audiences from around the world purchased $41.7 billion worth of movie tickets. For decades, countries like the US have reaped the benefits of international movie-goers’ insatiable appetite for blockbusters. Not only are these films financially successful, they also provide avenues for cultivating soft power.
In recent years, Chinese cinema has exploded. The country’s film industry now generates billions of dollars in revenue annually, and three of the top-20 grossing features in 2018 were produced in China. Yet, it has been the domestic market that has predominantly driven the success of these pictures. It remains to be seen if Chinese films can reinforce a positive image of Chinese culture to the world.
Top Grossing Films Worldwide (main interactive)
A Chinese Cinematic Odyssey
More Chinese are flocking to theaters than ever before. At the turn of the century, box office sales across mainland China totaled less than $1 billion. Last year, the Chinese box office raked in $8.9 billion, making China the second biggest player in the film industry after North America.
Theaters have popped up across China to accommodate this growing enthusiasm. In 2016, it overtook the US in having the most cinema screens in the world.1 By the end of 2018, there were almost 60,000 screens in China. It is worth noting that given China’s massive population, the number of screens per capita is a modest 37 screens per million people, one-third less than in the US. The number of screens in China is expected to grow to roughly 80,000 in the coming years.
Over the last two decades, movie making in China has also skyrocketed. In 2000, China released just 91 films. That number jumped to 798 in 2017, more than the 740 features released in North America and the 594 released in Japan.
Historically, Beijing has tightly controlled the industry. Often viewed as a tool for promoting its political agenda, the film industry was nationalized shortly after 1949. At the time, most foreign pictures — especially those from the US and Western Europe — were banned. While the industry underwent some initial reforms during the 1980s, those efforts primarily focused on distribution and exhibition management.
Change came in the early 1990s when the domestic industry experienced widescale financial trouble. Sagging attendance spurred Beijing to introduce a quota system in 1994, which permitted 10 foreign movies to be shown on Chinese screens each year. A year later, Beijing allowed private Chinese firms to start investing in the industry. Further reforms in the early 2000s facilitated the development of modern theater chains and opened the doors for foreign investment.
The Chinese government has outlined growth targets for the industry. At a national symposium held in February 2019, Wang Xiaohui, the director of China’s National Film Bureau, called on China to become a “strong film power” like the US by 2035. He also outlined revenue targets that would see China annually produce 100 movies that would each earn more than $15 million. Only 44 Chinese pictures topped $15 million in 2018.
Both PricewaterhouseCoopers (PwC) and Deloitte predict that China’s film market will become the largest in the world by 2020. PwC expects China’s box office revenues to hit $15.08 billion by the end of the decade, several billion dollars more than their estimate of $11.87 billion for the US. In addition to theatrical releases, pictures designated for streaming via services like iQiyi and Tencent Videos may further boost the industry.
Journey to the West
Mainland Chinese films have historically struggled to attract foreign interest. While recent megahits like Wolf Warrior 2 (2017) have netted hundreds of millions of dollars, most of their revenue was generated domestically. When considering the top-20 grossing Chinese features since 2005, less than 1 percent of their total revenue came from overseas. Over the same period, American blockbusters earned 35 percent of their revenue from foreign markets. This trend is especially significant when considering that many of the highest grossing movies in the world are either produced or co-produced by American studios.
While poor overseas performance generally plagues Chinese cinema, it did experience some success in the early 2000s with the breakout popularity of martial arts movies. Chief among these was 2000’s Crouching Tiger and Hidden Dragon, which was jointly financed by China, Hong Kong, Taiwan, and the US. Crouching Tiger and Hidden Dragon remains the highest earning foreign-language film in the US ($128 million). In China, the feature received a lukewarm reception and grossed just over $1 million.
Other martial arts movies from that period also experienced international success. Hero (2002) and Fearless (2006) – both of which starred Jet Li – each grossed tens of millions of dollars and remain the 3rd and 7th highest grossing foreign-language films in the US. Since the mid-2000s, however, martial arts pictures have drawn less interest from western audiences.
Recent blockbusters exemplify the waning international appeal of Chinese cinema. The top grossing Chinese film each year since 2016 – Operation Red Sea (2018), Wolf Warrior 2 (2017), and The Mermaid (2016) – all earned over $500 million each, but more than 95 percent of their revenue came from domestic sales. Every number one North American feature since 2009 earned roughly half of its revenue abroad. The top-grossing Indian pictures generally make 20 to 30 percent of their box office revenue overseas.2
Several factors have contributed to this lackluster international performance. Some Chinese films expect viewers to be familiar with Chinese culture and history, which can make certain stories inaccessible to global audiences. Historical epics such as Red Cliff 1 (2008) and Red Cliff 2 (2009), for instance, take for granted that movie-goers have some knowledge of late Han dynasty politics.
Language barriers can also stymie interest. In a 2016 survey of 16 countries targeted by the Belt and Road Initiative, nearly 70 percent of respondents reported that the subtitles in Chinese films were difficult to understand. In the US, revenues for foreign movies declined by 61 percent from 2007 to 2014.
Whereas Hollywood relies on the tried and true three-act story structure, some Chinese features have been influenced by what Hollywood producer Janet Yang referred to as China’s “long rambling stories in oral tradition.” Films such as Let the Bullets Fly (2010), which failed to even secure a western distributor, have been criticized for their difficult to follow plot twists.
Government censorship is also a critical factor. The Harvard Political Review noted that “film content that tends to sell well in box offices — sex, violence, and rebellious individualism — is often screened out by Chinese censors.” Nationalistic pictures that play well with both the government and the broader Chinese public often hold little appeal overseas.
|Highest Grossing Films in China (millions US$)|
|Wolf Warrior 2 (2017)||854.2||16.1||870.3|
|The Wandering Earth (2019)*||661.9||22.4||684.3|
|Operation Red Sea (2018)||575.8||3.4||579.2|
|Detective Chinatown 2 (2018)||541.4||2.7||544.1|
|The Mermaid (2016)||526.8||27||553.8|
|*As of February 2019|
|Sources:Box Office Mojo, EntGroup|
International awards have proved elusive for China. No feature solely produced by China has ever won Best Foreign Language Film at the Academy Awards or the Golden Globes.3 Italy and France have taken home the most Academy Awards for Best Foreign Language Film, winning 14 and 12 times, respectively.
A handful of Chinese movies have been recognized at prestigious film festivals, but their content often runs afoul with censors. Farewell My Concubine won the Palme d’Or at the 1993 Cannes Film Festival, but China banned the film two weeks after its opening. Director Jia Zhangke won the award for Best Screenplay at Cannes in 2013 for A Touch of Sin, but the picture was never released in China. Jia’s 2006 film, Still Life, won the Golden Lion for Best Film at the Venice Film Festival and was accepted by Chinese authorities.
The growing popularity of streaming services such as Netflix and Amazon Prime Videos may provide new opportunities for Chinese pictures. Despite Netflix being banned in China, the company purchased the online distribution rights of the Chinese animated picture Next Gen (2018) for $30 million. It also acquired the rights to stream The Wandering Earth (2019), which grossed over $630 million in just three weeks since opening.
Hollywood Goes to China
Foreign films are widely enjoyed by Chinese. In terms of revenue, foreign movies made up 41.4 percent of the Chinese box office market in 2013. Four years later, this share had jumped to 46.2 percent.
According to the Cheung Kong Graduate School of Business, the best-performing foreign pictures are action flicks with easy-to-follow plots. The Fast & Furious franchise, for instance, utilizes easy to understand storylines and exciting action sequences to generate broad interest from viewers. The Fate of the Furious (2017) made an impressive 31.8 percent of its box office earnings in China. The preceding film in the franchise, Furious 7 (2015), raked in 25.8 percent of its revenue from mainland audiences.
The success of American movies in China has occurred despite facing severe restrictions. All foreign pictures are subject to Beijing’s quota system, which was introduced in 1994 and marked an end to a 45-year ban on most foreign films. The first major western feature shown on Chinese screens was The Fugitive, a 1993 action thriller starring Harrison Ford.
After admission to the WTO in 2001, Beijing upped the quota to 20 movies. The limit was raised again in 2012 to 34 films, of which 14 were required to be in either 3D or IMAX format. Pressure to meet domestic box office targets has resulted in the quota being exceeded. In 2018, China imported 41 foreign features. Negotiations were held in 2018 to raise the quota formally, but the ongoing trade dispute between the US and China has delayed these efforts.
Once approved to be shown on Chinese screens, foreign studios receive only 25 percent of the revenue earned in-country. This rate is significantly lower than the 50 percent foreign studios make in the US and the 40 percent earned in most other countries around the globe.
Foreign features not added to the quota can still enter the Chinese market. Studios have the option to sell a film’s distribution rights to a Chinese distributor for a flat fee. The Chinese distributor is then entitled to keep all revenue generated in China. In recent years, a new revenue-sharing distribution model has started to emerge. One of the first pictures to utilize the model was 2016’s Resident Evil: The Final Chapter. Leomus Pictures purchased the movie’s Chinese distribution rights from Constantin Pictures for between $5-10 million but agreed to share revenue exceeding $75 million with Constantin. The film went on to earn over $160 million in China.
Government limitations have encouraged foreign studios to co-produce movies with Chinese counterparts. Co-produced films are not subjected to quota restrictions and generally receive preferential market access. The number of co-productions has steadily risen since 2014. The Meg, a 2018 thriller that follows a group of scientists who encounter a giant shark, was co-produced by Warner Bros. and China Media Capital’s Gravity Pictures. The picture earned $527.8 million worldwide, making it the all-time highest grossing co-production between the US and China.
Beijing works to maintain a balance in attendance between foreign and domestic movies. It does so by controlling release dates and implementing periodic blackouts on non-Chinese films. During peak seasons, such as the Lunar New Year, screens are often reserved for domestically produced features.
Other countries have enacted similar but less restrictive safeguards to protect the domestic market. South Korea requires all movie theaters to screen domestic pictures for a minimum of 73 days per year. In Spain, the minimum number of screening days for domestic films per year is between 73 and 91 days.
Made and Re-made for China
Several American studios have begun to cater their films to Chinese viewers. Recent blockbusters, such as The Meg (2018), Skyscraper (2018), and Warcraft (2016), were all produced with an eye on the Chinese market. Warcraft was particularly successful in this regard. The movie bombed at home but received 49 percent of its $430 million worldwide haul from China.
Nevertheless, it can still be challenging for foreign pictures to enter China. In addition to the quota system, foreign features are screened by Chinese authorities, who determine if changes are needed before they hit Chinese theaters. Until recently, these services were performed by the now-defunct State Administration of Press, Publication, Radio, Film, and Television. The Central Committee’s Publicity Department assumed these functions in 2018.
Since China does not have a film rating system, movies must be deemed appropriate for all age groups. This restriction often forces studios to cut scenes, as was the case with the 2017 superhero flick Logan, where much of the violence was edited out of the Chinese release. Although initially approved by censors, Django Unchained (2012) was abruptly pulled from the theaters on its opening day due to nudity.4
The authority wielded by Chinese authorities has encouraged Hollywood to make significant changes to its pictures. In 2011, MGM Studios spent $1 million altering Red Dawn to replace Chinese soldiers (the primary antagonist) with North Koreans. A leaked email from the creators of 2015’s Pixels stated that scenes depicting damage to the Great Wall and Shanghai might prevent access to the Chinese market. Similar concerns prompted the creators of Dr. Strange (2016) to re-imagine a Tibetan character from the original comic books, the Ancient One, as Celtic.
Hollywood has even gone as far as to write new scenes specifically for Chinese audiences. The creators of Iron Man 3 (2013) added four minutes of content specifically for the Chinese release that features major Chinese movie stars, including Fan Bingbing. Critics universally panned the additions.
Chinese investments into Hollywood may further compel American filmmakers to appeal to Chinese sensibilities. In 2012, Dalian Wanda Group Co. purchased AMC Theaters for $2.6 billion. AMC Theaters owns roughly 20 percent of all movie screens in the US, which has helped Wanda become the world’s largest cinema owner.
Wanda also acquired US-based production company Legendary Entertainment in 2016 for $3.5 billion. Legendary was responsible for several high-grossing features, including The Dark Knight (2008) and Jurassic World (2015). The move fueled worry in the US about China’s growing presence in Hollywood. In September 2016, 18 members of the US Congress, including the chairman of the House Intelligence Committee, penned a letter to the US Government Accountability Office highlighting their “growing concerns about China’s efforts to censor topics and exert propaganda controls on American media.”
- The number of screens reported varies slightly, PricewaterhouseCoopers indicated that China had 41,056 screens compared to 40,928 or so in the US in 2016.
- The top 10 highest grossing Indian films of all time earned an average 28.2 percent of their box revenues overseas. Actual percentages range from 19 to 33 percent, excluding outliers
- Crouching Tiger, Hidden Dragon won the Academy Award and Golden Globe for Best Foreign Language Film in 2000. The film was co-produced by China, Hong Kong, Taiwan, and the US.
- The film was re-released a month later after additional editing.