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Lukewarm reform

Biz booms, but censorship, red tape pose problems

A Great Leap Forward in Chinese cinema resulted in the country’s most successful year ever in 2006, as the biz showed signs of great health never before seen. There were 330 feature films made in China last year, a rise of 70 from the previous year.

The industry has never made so much money — last year B.O. revenues rose by nearly a third to $336 million, while a golden-armored army of costumed chopsocky epics held off evil Hollywood invaders to make sure that five of the top 10 films last year were Chinese.

The Chinese are going to the movies in numbers never seen before, and there were some landmark rulings against pirate DVD makers.

The reasons?

The Chinese government is making strong efforts to encourage the movie industry, such as freeing up state funding toward production and making sure Chinese movies get a clear run in the cinema free of competition from foreign movies.

Private coin also is being invested in Chinese movies as B.O. improves. With stock markets rocketing, and with overall wealth increasing, many canny investors are keen on investing in film. The standard of cinemas — once drafty, vermin-infested places — also is rising quickly as Chinese flock to the new cineplexes.

All seems rosy in the garden heading into 2007, but the real picture is extremely complex, and the broader message is that China is improving, but proceed with caution.

Reform in China is a process of give-and-take, and advances often can appear to be rolled back a bit before further change is implemented. This is true in every industry, not just the entertainment biz, and all in all there has been little change in the fundamentals of the industry.

China claims to have opened its film market to foreign involvement, but there is confusion about whether China wants foreigners in the entertainment business or not.

Recently, Zhu Hong, a senior official in the State Administration of Radio, Film & Television, China’s film and TV watchdog, said Beijing was not planning to halt new foreign investment in film and TV production companies and remained committed to opening up the biz despite earlier being quoted as saying the government wanted to stop granting licenses to joint-venture companies.

Skeptics say Beijing wants foreign input, but only on its own terms, and they make comparisons with more traditional industries, such as engineering or technology, where foreign firms are invited to form joint ventures with Chinese firms to allow the local partner access to the know-how of the foreign partner.

“Ultimately, China’s ambitions are not about boosting the profits of foreign partners, though win-win is an expression you hear a lot. The Chinese want Chinese movies to compete internationally and need to learn from Hollywood how to do this. In the auto business, this is called technology transfer, and it’s the same thing here,” says one U.S. industry insider with broad China experience.

Censorship and the quota system remain major hurdles to greater investment in China. Just 20 foreign movies are allowed in China every year, although this restriction does not apply to co-productions, but it’s still an impediment to growing the market.

The studios and other foreign filmmakers have already begun the tortuous process of seeking approval from the censors for their pics this year. The procedure is opaque, random, arbitrary and infuriating for the majors unused to political bans or editing.

The previous 20 foreign quota films, including “The Da Vinci Code,” “King Kong” and “Miami Vice,” brought in $102 million at the Chinese box office, which is a sign that B.O. in China is growing in importance. “Code” was removed from theaters early after apparently angering religious groups in China, despite its popularity with auds.

This lack of clarity can cost a lot of money. “Mission: Impossible III” was slated for a day-and-date release last year, but ended up hitting Chinese theaters months after its U.S. release — pic was banned because it was determined that laundry on a Shanghai washing line painted a poor image of the city. Even though it held its own in China, taking in more than $10 million, it suffered from the wide availability of pirate copies before its Chinese theatrical release.

Then there are the blackouts. Last year, regulators imposed four blackout periods, during which time new releases of Hollywood pics were banned in order to boost domestic product.

Not exactly what you’d call a level playing field: restrictions on the number of pics, on what they are about, and when they can play.

The government has been making noises about dealing with piracy, which the biz reckons cost more than $2.6 billion in China last year because of pirates who control the vast majority of the market. There have been highly public raids on factories, discs have been steamrollered in public, and the government seems to be making an effort.

The problem is that many of the factories making the products are run by local governments over which Beijing has little control, making it difficult to oversee production. And monitoring distribution is also hard.

Another bugbear for everyone making movies in China, foreigners and locals alike, is the lack of a ratings system.

Filmmakers in China believe that if the censor’s red pencil or overactive scissors were replaced with a reliable ratings system, helmers and producers could take more risks with content and story, which would ultimately woo bigger auds and boost the biz.

In the absence of a classification system, there are no restrictions on who gets to see a movie, and while a ratings system has been on the cards for many years, it is still not looking imminent. Nor is an end to the state-run China Film Group’s hold on the industry looking likely.

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