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China Launches Incentive Scheme to Boost Box Office of Local Films

China’s Film Bureau has announced an incentive scheme to reward movie theaters that increase box office scores for local films. The move will take effect from Jan. 1, 2018.

The scheme rewards theaters that derive more than 55% of their box office revenues from Chinese films, allowing them to keep half of a 5% tax they pay on ticket sales. There are bigger bonuses for those that score 60% and 66%.

This is not the first time that China has announced such a scheme. In March last year it said that theaters earning 66% could keep half the tax.

“I don’t think the Chinese government reduced the target because they were feeling generous. They wanted results, and they weren’t getting them at 66%,” said lawyer Matthew Dresden at law firm Harris Bricken. Boosted by the $860 million gross for “Wolf Warriors II,” market share for Chinese films stood at 52% as of mid-November.

The scheme has numerous potential problems. These include the creation of an additional incentive for theaters to engage in fraud. Chinese cinemas have a long-established history of distorting results and diverting revenues from one film to another. The requirement to use a government-controlled box office reporting system is supposed to eliminate this.

It also contradicts other systems and structures. The major exhibitors are privately owned, profit-maximizing companies. And the country’s dominant distributor of imported, revenue-sharing movies is state-controlled China Film Corp.

The scheme adds another wrinkle to the ongoing negotiations between China and the U.S. over quotas, revenues and distribution conditions. China currently operates a range of tight controls over foreign films. These include regulators who decide release dates and two or three blackout periods per year when only Chinese films can be released.

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