Subsidized Cartoons, Comics Tickling Too Few

Breaking into the animated film industry usually requires a basic plan for blending colorful images and clever storytelling in ways that entertain the public—and make money.

Since 2006, however, animated film start-ups in China have done quite well with a lot less effort by simply focusing on tax incentives and other forms of government subsidies rolled out by various agencies through a top-down effort to build the industry.

Of secondary importance for too many of the industry’s relatively new entrepreneurs, say critics of the heavily subsidized animated film and comic book companies, is meeting public demand for creative entertainment.

“Seeking profits, some companies don’t research the market or products,” Jin Peng, deputy chief for animation at the Ministry of Culture’s Department of Cultural Industries, told Caixin. “Instead, they diligently research various local government policies.”

And in July, the culture ministry strengthened the industry’s attachment to the government by releasing the first-ever five-year plan expressively designed to set a course for animated films and comics production.

The official Development Plan for the National Animated Film Industry and Comic Books calls for private investment support and encourages companies to raise money through the stock market. Also getting a government green light for financial involvement are culture-focused investment funds, small and medium-sized enterprise venture capital funds, and banks.

Existing companies in line to attract this hoped-for private investment have already benefited from up to six years of government support that may have totaled billions of yuan. Agencies at multiple levels have worked hard to develop the animated film industry through subsidies and various reward programs, said Wang Lei, CEO of a successful animation company based in Shanghai called Mister Cartoon Pictures.

The scope of the subsidies is so broad that business owners who do their homework can win enough government support to completely cover all costs for an entire production, Wang said.

A business recruitment agent at Shanghai’s Baoshan Science and Technology Park told Caixin flexible incentives and subsidies can be tailored for specific companies depending on business area, size, and development stage. The park is one of many across the country that has become a magnet for animated filmmakers and related companies.

“Shanghai’s subsidies are fairly moderate” compared with those offered in other parts of the country, said Fu Yang, deputy director of an agency that manages businesses in a section of Hangzhou.

“More and bigger subsidies” than Shanghai’s have been made available by “several northern cities eager to develop the animated film industry,” Fu said.

And they have a lot of locations to choose from: More than two-thirds of all provinces provide some sort of fiscal support for animated film companies, often through rewards doled out to each film maker after a project is completed and screened.

Hero of Waste

A flash point for criticism of the sector’s government support was an animated film released in June called The Heroic Qi Jiguang. It’s a 90-minute drama jointly produced at a cost of 12 million yuan by Yuyao-based Zhejiang Hemudu Animation Cultural Development Co. Ltd. and the Yuyao Municipal Propaganda Department.

Qi was a general who defended the motherland against Japanese pirates during the Ming Dynasty.

Critics claimed the government spent millions of yuan but in return got a poorly made film with stiffly drawn characters, low-grade sound effects, and mistakes in the subtitles.

Even before it was released—and apparently to help justify the government spending—the city of Ningbo declared The Heroic Qi Jiguang “a fine art project.”

But reactions from professional film reviewers and the public were a lot less favorable than Ningbo’s after the film’s promotional trailer appeared on the Internet in May.

Thirteen industry experts, including Guangzhou-based Hecheng Animation Technology Co. Ltd. founder Chen Gelei, Communication University of China’s School of Animation professor Xue Yanping, and Beijing Film Academy School of Animation associate professor Chen Liaoyu co-wrote a letter to local officials questioning the film’s budget.

“At a production cost of 2,000 yuan per minute, a 90-minute film’s production cost would be 180,000 yuan or generously 2 million yuan at the most,” they wrote. “How was the other 10 million yuan spent?”

The letter was sent to the Ningbo and Yuyao governments and their respective propaganda departments. It asked:

—Did the Yuyao city government participate in investing, producing and distributing the film?

—Did The Heroic Qi Jiguang appear on the Ningbo propaganda department’s list of fine arts projects?

—How much government support did the film’s producers receive?

The Yuyao government’s official statement response was: “Hemudu Animation raised the 12 million yuan itself. There was no investment by the Yuyao city government. In terms of policy, Hemudu Animation is just like any other cultural enterprise and enjoys policy support stipulated in measures for supporting the development of cultural industries in Yuyao.”

A Hemudu statement posted on a microblog said, “The 12 million yuan includes script, production, promotion and distribution costs. The government did not invest in the project.”

Yet the criticism continued. Chen, for example, blasted the film company for a phony “theater release” of The Heroic Qi Jiguang. The film was screened for one day at a movie theater, he said, so the producer could qualify for subsidies and other government perks.

Indeed, Chen said, it is possible that the government before the “release” did not give the filmmaker any money, as Hemudu said. But afterward, it’s likely the wallet was opened.

Indeed, most cities make good on promises for subsidies and other perks only after a work is released, said a Hangzhou source who helps film companies raise funds.

In Hangzhou’s Xihu district, for example, local companies producing an original animated film can get 500,000 yuan for a movie release if the film is “at least an hour long and released in theaters.”

What happened with The Heroic Qi Jiguang “is nothing new,” said Wang. “There are many such companies.”

Plentiful Perks

The State Council, Ministry of Finance, and other central government departments started pushing to expand the animated film industry nationwide in 2006. A government circular that year called for providing technological innovation funds to technology-based small and medium-sized enterprises, while supporting them through preferential income and value-added tax policies.

The culture ministry assumed oversight of the animated film and comic book sectors in late 2009.

Local governments reacted to the central government’s 2006 and 2009 decisions by encouraging animation companies with subsidized office leases, tax breaks, and outright payments for finished products.

Between 2006 and 2010, the industry’s financial value grew an average 30 percent annually, according to the culture ministry. The animated film and comic book industries were worth more than 47 billion yuan in 2010, the ministry said.

Total television cartoon output rose to about 3,666 hours from 1,333 hours over that period, the ministry said, while the number of animated films increased to forty-six from twelve. In 2010 alone, the producers churned out 2,166 hours of animated films combined.

Wang said that “objectively speaking” such growth would have been impossible without government subsidies. And today “many companies with good creative abilities are continuing to create original material and exist” thanks to subsidies.

Today every provincial capital city has a business park for animated film and comic book companies. Prefectures and counties have built production centers as well. As of late 2010, more than forty government-supported animation industry “bases” were operating nationwide.

Research and development for culture-related industries cost governments and companies a combined 14.3 billion yuan in 2010, said Liu Yuzhu, director of the culture ministry’s Department of Industry. The largest single portion—1 billion yuan—went into the animated film and comic books sectors.

Despite all that money, argue critics, the results have been thin.

“There are so few works worth being called animated film coming out of the bases,” said Fu. “Most projects boost government performance evaluations. They hoard land in the name of animation policy and get preferences and subsidies.”

And companies initially attracted to subsidized industrial parks often pull up stakes as soon as the incentives expire. Afterward, Fu said, land for business parks “acquired at a low price or for free is then turned over for real estate development.”

Meanwhile, Fu said, the industry has been beset by other problems such as a lack of private financing and a shortage of high-end talent.

Wang said the sector is struggling in part due to a lack of professional staffers. Original productions are particularly hard to make because “there’s a shortage of people who can tell stories.”

Thus, Wang said, the animation industry has found itself in an awkward position. Speculators, not long-term investment sources, are chasing government-subsidized businesses and producing low-quality films. And because output quality is poor, the industry has a hard time attracting investors and professionals.

The culture ministry’s new five-year plan may help lure more private investment.

Wang’s company, which is older than most filmmakers in China, is best known for the popular 2009 animated film Pleasant Goat and Big Big Wolf—proof that Chinese filmmakers have the capacity to entertain and make money, too, even without subsidies.

Huang Yong, an associate dean at the Beijing Film Academy College of Animation, is among those calling on governments to re-focus animated film industry support and help animators who need and deserve it.

Wang Xiaoqing is a Caixin staff reporter, and Mei Ke an intern reporter at Caixin.