Dreams of open China market dim

Foreign cap, Hua Xia oppression cause obstacles

Hollywood’s hopes of gaining greater access to the vast Chinese market are heading for a couple of roadblocks.

First, the Chinese government has signaled it will not raise the 49% cap on foreign ownership of Mainland cinemas — contrary to earlier assurances.

The other issue that worries some U.S. execs is the China Film Group’s attempts to stifle China’s second film distrib, Hua Xia.

China Film Group chairman Yang Buting had hinted at a relaxation of foreign investment rules during his speech at the ShoWest convention in Las Vegas in March.

The new administration headed by President Hu Jintao, which took the reins the same month, has reportedly overturned that policy.

A well-placed source in the Chinese film bureaucracy told Daily Variety that the government’s State Administration of Radio, Film and Television is considering raising the cap to 50% or more in the “near future.” But one U.S. exec who deals with China said Wednesday that he had learned from Beijing officials the 49% limit will remain.

That would be a blow to Warner Bros., which has a minority interest in a Shanghai multiplex and is planning to expand in China; and to other Western exhibs, such as Loews, that have been looking at the viability of entering the market.

Under the previous regime of President Jiang Zemin, Chinese execs were anxious to attract foreign investment in exhibition, and implied the 49% ceiling would not be enforced for companies that spent significant coin in building entertainment venues incorporating theaters.

However, Western firms could circumvent that regulation via joint ventures (as Warner has in Shanghai) because there are no restrictions on ownership splits in co-ventures.

Meanwhile, China’s second film distrib, Hua Xia, has Jackie Chan starrer “The Medallion,” produced by Hong Kong’s Emperor Multimedia Group, slated as its first release Aug. 15. But China Film, which lost its monopoly on distributing U.S. and other foreign films, plans to release up to three Hollywood films in August, aiming to spoil its new rival.

“Finding Nemo” is set for Aug. 1 followed by “Charlie’s Angels 2: Full Throttle” on Aug. 8.

A China Film exec says “Terminator 3: Rise of the Machines” may bow at the end of August.

“This is not fair to the second distributor or to the three U.S. films and their studios,” said one U.S. distrib. ‘The Medallion’ will be given little space to breathe, and it will be very difficult for Hua Xia to secure as many screens as it would like.”

China’s cinemas are making a slow recovery after many were shuttered while SARS swept the country.

Even now, some theaters are selling tickets for every second row or leaving spaces between occupied seats to minimize the health risks.

Considering the circumstances, “Daredevil,” the first U.S. pic released post-SARS, has performed creditably, grossing $618,000 in eight days.

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