The door is about to swing open on the world’s largest untapped market for movies. The Chinese government says it’s ready to buy American and other foreign films on a revenue-sharing basis, signaling the end of the entrenched practice of acquiringproduct for a low, flat fee.

The revolutionary change in the Chinese approach to Hollywood is another significant step in the country’s move to a market economy.

The U.S. studios have long complained that the monopolistic China Film Export & Import Corp. routinely accepted a small number of Hollywood films each year (it imported 12 in 1992) for a flat fee of $ 30,000-$ 50,000 each.

Now that’s changing, and many more dollars will flow. First official notice of the new policy came last week in a Shanghai newspaper interview with China Film’s recently hired general manager Wu Meng Chen.

Wu acknowledged two factors propelling China Film to buy films from U.S., European, Hong Kong and Australian producers on a percentage share: Erosion of Chinese movie attendance — reported to have dropped by more than 30% last year — and China’s frustration at having to wait four or five years for films on the flat-rate system.

The Chinese hope to start releasing at least 10 new foreign films on a revenue-sharing basis in the latter half of this year, said Wu.

China’s population is estimated at more than 1 billion, although only 27% live in cities and could be considered likely regular filmgoers. Per capita gross national product is $ 360; one in eight persons owns a television, vs. Russia’s one in three.

Wu also responded to the West’s criticism of China’s ineffective copyright laws by acknowledging that copyright must be protected. He did not outline any steps the government may be contemplating.

A spokesman for the Motion Picture Export Assn. of America confirmed that China Film had told the MPEAA of the policy switch more than a month ago.

He said the MPEAA is lobbying Beijing to toughen and enforce the copyright laws, which at present impose only fines, not jail sentences, on offenders.

China’s proposal to share revenues “is a major step forward,” said one U.S. major exec, who says he’s been negotiating with China Film Export since late last year.

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