Studios fascinated by China changes

As Xi gains power, Hollywood takes temperature of Sino warming trend

Xi Jinping, the man poised to take over as China’s supreme leader, is a movie fan who apparently loves “Saving Private Ryan.” Whether that translates into a desire to help Hollywood is an open question.

Certainly Xi has been a friend to Hollywood recently, having overseen the February agreement to loosen China’s import restrictions on foreign films. And he’s likely to be tough on issues such as piracy and intellectual property rights protection as China seeks to clamp down on corruption, and innovate more, which is good news for Hollywood.

But the bigger question is what will happen during the Communist Party Congress, which kicked off Nov. 8 and is scheduled to last about a week. The huddles will announce a new government and handover of power, so showbizzers are eager to know what the once-in-a-decade leadership change in China means. Will Xi open up the world’s second-biggest movie market or continue to focus on boosting the domestic industry by keeping a lid on overseas content?

Han Sanping, topper of the China Film Group, which dominates all aspects of the biz, including importing and distribution, believes the fifth generation of leaders in China will be a reforming one, which would be a good thing for Hollywood.

“After the 18th Party Congress, reform and opening will continue,” Han told bizzers Oct. 30 at the U.S.-China Film Summit in Los Angeles, organized by the Asia Society of Southern California.

Still, the domestic film biz is central to the government’s goal of boosting Chinese influence overseas. And while Xi may want to allow more foreign product into China, the political pressure to focus on homegrown movies will be great.

Chinese filmmakers feel at a disadvantage vis-a-vis Hollywood due to the censorship rules Xi’s government oversees.

So far this year, the top three movies have been imports — the 3D reissue of “Titanic” (which took in $150 million), “Mission: Impossible — Ghost Protocol” ($109 million) and “The Avengers” ($90.5 million) — despite lengthy blackout periods for foreign movies. Measures such as releasing blockbusters like “The Dark Knight Rises” and “The Amazing Spider-Man” on the same day were meant to lessen those films’ B.O. impact, and it looks likely that “Skyfall” and “The Hobbit” will suffer the same fate.

The 18th Communist Party Congress marks a transition from a generation of technocrats who had overseen the past decade in China — all nine members of the all-powerful Standing Committee of the Politburo were engineers — to a new fifth generation of leaders who have mixed backgrounds.

Hundreds of overseas reporters have applied to cover the congress, and those accredited are given a baseball cap, a backpack and other goodies by a party that has discovered the importance of publicity and the appearance of openness.

For months, it has been assumed that Xi will be named General Secretary of the Communist Party at the congress, before assuming the presidency from Hu Jintao, and will take over the leadership of the army in the following months.

Xi faces difficult times. While the party will put on a unified face during the Congress, the past few weeks have seen fierce jostling for power between the ruling factions, and among the princelings and the cadres linked to the Communist Youth League that is President Hu’s power base.

The fifth generation of leaders will have a raft of knotty problems to deal with. They inherit the weakest economic growth since 1999, with expansion seen at 7.7% this year. They also will have to deal with rising unrest over land grabs and corruption, and the challenges of an aging population.

Amid all this, Chinese box office is hardly the top priority — but it is a priority, because, as Hollywood knows, the film business is about money and about global perception. B.O. has risen dramatically in the past few years, and is forecast to exceed $2.5 billion this year. It reached $1.95 billion at the three-quarter mark, according to data from biz watchdog the State Administration of Radio, Film and TV.

Xi’s easing of import restrictions, which allows entry into the country of 14 more 3D or large-format films per year on top of the 20 that are already imported, has helped. Foreign distribs also have seen a profit-sharing increase on those films to 25%, up from 13%.

Besides having to compete with more Hollywood movies, another disadvantage for locals is that many Chinese bizzers have had projects on hold for months, waiting for the power handover to be completed, and for the chain of command to become clear again.

A management consultant who asked for anonymity says getting decisions from senior management has been impossible since the start of the year.

“People don’t know if they will still be in jobs after the transition, because the new administration will bring its own people in, the cogs in the wheel will turn, and there will be different people in decision-making positions at many levels,” he says.

How the cogs align themselves will the true indicator of Hollywood’s fortunes in China.