Key to Demystifying the Chinese Film Business: Understand the Rules

Looking at the Chinese film market, you might be tempted to think the plethora of underperforming Hollywood tentpoles paints a picture of a flailing Chinese motion picture business.

However, China may still be the most misunderstood player in global film and television.

In the mid to late 2000s, it was a bit of a running joke: I have a Chinese investor who wants to put $50 million into a fund. Sure, you do. Such deals were often rigorously negotiated before fizzling out abruptly. It took some time for actual agreements to take shape, but once they were locked down, it was quite the cornucopia, from Wanda Groups 2012 acquisition of AMC Theatres and 2016 purchase of Legendary Entertainment to consistent film investments by Huayi Brothers and Tencent.

But the mixed success coupled with political headwinds meant the party wouldnt last forever. While franchises such as Fast Furious and the Marvel Cinematic Universe thrived, others were not so fortunate. Chinese consumer appetite is not the whole story, as several key considerations define the level of access foreign productions receive in the region. So understanding the landscape is of critical importance.

First, know it is absolutely at the whim and will of the Chinese government that these deals happen or happened at all. That is not to say one is dealing with a government representative when partnering with Chinese media. In fact, its quite the opposite. Chinese capitalism is alive and well and has been for some time. I wont get into the issues of taxation, blocker corporations, foreign tax havens and the like, but I will say that Chinese investors are in media to profit as much as anyone.

Its just that the rules are different.

To be perfectly honest, the countrys film business success has been on a level that ought to make Western capitalists blush. In addition to many successful foreign investments and distribution deals, Chinese domestic productions have enjoyed tremendous success think The Battle at Lake Changjin, Wolf Warrior 2 and Hi, Mom, all of which neared 6 billion RMB in reported gross, with 9 of the 10 highest-grossing films in the Chinese market being homegrown product.

Knowing how things work is everything, from obtaining governmental approval which can be lost or withdrawn in an instant if your production has anything the Chinese government and its cultural authorities deem antithetical to understanding the lack of transparency and accounting in Chinese distribution. Failing to understand the distribution modes and business practices in China is a recipe for disaster.

As Rock Island in The Music Man makes clear: Ya gotta know the territory.

The Chinese people are also starved for entertainment. They do crave Western products in addition to their own but tend to abhor any kind of messaging that can be perceived as anti-Chinese or corruptible in terms of commonly held values throughout the world. Whether fictionalized or historic, Chinas depiction as the bad guy will never fly, while LGBTQ+ themes have also stifled the flow of filmic product to the mainland, as was the case with Lightyear and its depiction of a same-sex kiss last year.

Even seemingly innocuous jokes get as much of a critical eye. In Monster Hunter, a picture I worked on that was adapted from the popular Capcom video game series, a silly exchange about the kind of knees a character had that prompted the response, Chi-knees, resulted in the picture being pulled.

Tensions between Western powers and China certainly havent helped. Relations under the Obama and Trump administrations were fraught to begin with, with the latter worsening during the COVID-19 pandemic, and distrust is still at play post-COVID. Nevertheless, deals do continue to happen, even as the prevailing winds change.

During COVID, I helped represent Chinese investors on 2022s Moonfall, and their resolve was what made the expensive production possible, although its financing, production and distribution were some of the most complicated I have ever encountered, courtesy of COVID restrictions, insurance, bonds, multiple financing sources and the like.

At the end of the day, the appetite for content in China remains high, and financing, production and distribution of Western films can still work, but everything is contingent upon understanding the market and the best ways to sync it with Western ideals and business practices. Otherwise, youre leaving billions in investment capital and audience returns on the table and no one benefits from that.

Gregg Ramer is an entertainment attorney and business adviser with extensive global experience handling media transactions. He has represented companies such as Huayi Brothers and Tencent.