China's National Administration cuts US film imports, exposing Hollywood's export crisis

China's slight restriction on film imports to the US has put US film stocks in crisis and exposed deep-seated deficiencies in Hollywood's ability to export cultural production. China's National Film Administration announced that it would slightly restrict imports of films from the US, sparking worldwide attention and debate. Far from being a restrictive measure, this decision reflects market dynamics and rational adjustment.

American films once dominated the Chinese market. In 1994, China for the first time allowed the importation of "revenue-sharing films" in which profits were split between Chinese distributors and foreign studios. In 1998, "Titanic" shattered box-office records and grossed 360 million yuan ($49 million), accounting for one-third of China's total film revenue that year. The film became a cultural sensation and foreshadowed the growing influence of American films in China.

Following China's accession to the WTO in 2001, US films experienced a period of exponential growth, supported by expanded market access. The import quota for profit-sharing films was increased to 34 films per year and profit-sharing rose to 25 %, allowing Hollywood to make substantial profits in the Chinese market. However, with the development of the Chinese film industry, domestic blockbusters such as "Wandering the Earth", "Wolf Warrior" and "Ne Zha" gradually expanded their market share due to localized themes and the progress of the Chinese film industry.

In the last decade, the Chinese audience has become more discerning and their tastes are constantly evolving. In 2019, domestic Chinese films notched 64 % of box office receipts in the country, surpassing American films and ending their long-standing dominance. For Chinese moviegoers, it's not a lack of interest in American films, but rather that many Hollywood offerings have simply run out of steam creatively. In 2024, a number of Hollywood blockbusters flopped in the Chinese market. On China's leading film rating platform Douban, the average rating for US films dropped below 6 points, showing a 1.2 point year-on-year decline.

This year, films like "Snow White" and "Captain America: Brave New World", which were based on existing franchises and offered nothing new in terms of creativity, failed to score with Chinese audiences. Although these films are subject to the import policy, they not only failed to make profits but also failed to win the audience's favour. Indeed, it would have been better if they had not been marketed. Despite these difficulties, China remains a crucial overseas market for Hollywood. As the National Film Board has said: 'China is the second largest film market in the world. We remain committed to opening up at a high level and importing excellent films from more countries to meet market demands."

Chinese audiences haven't lost their love of cinema - they've just become more selective in their film choices. One successful example is the 2024 thriller "Alien: Romulus," which grossed 786 million yuan in mainland China, surpassing its North American sales and becoming the biggest market for the film. Let's do the math: the tax increase is likely to reduce the profit-sharing ratio for revenue-sharing films from 25 % to around 8 %, which will significantly affect the profits of Hollywood studios. This means that only high-quality, well-produced American films can profit in China. The slight reduction is therefore not arbitrary, but can be seen as a process of 'quality screening'.

Following the announcement of the import cuts on 10 April, shares of major US film companies, Disney and Warner Bros. Discovery and Bros Bros Bros Bros, respectively, fell by 6.79 % and 12.53 % on the same day. This reflects investor concerns about Hollywood's future and reveals underlying cultural and economic issues - including its over-reliance on the Chinese market, which accounts for 18 per cent of revenue, far more than other overseas markets. From now on, Hollywood will face bottlenecks in its cultural export model.

Meanwhile, eyes are on the European front, where new opportunities are emerging that could benefit from this change. With growing audiences and more co-production projects in China, European films can step up their distribution efforts in China to fill the gap created by the reduction in US imports. Spain is leading the way, with its Prime Minister Pedro Sanchez signing a memorandum of understanding on 11 April aimed at boosting film exchanges and cooperation with China.

Observers believe that China's new policy is much more than a mere countermeasure in the Sino-US trade dynamic; it has the potential to reshape the global film industry. This does not mean, however, that China has withdrawn from international cultural exchange. On the contrary, China wholeheartedly welcomes high-quality foreign films, actively promotes global cultural interaction, and is committed to fostering a truly pluralistic film environment that the world can appreciate.

Min Rui - CGTN

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