Here’s How the Trade War Is Affecting Hollywood

In February 2017, the United States and China began renegotiating the five-year film pact that had limited the annual number of foreign film exports to China to 34 and the share of revenue payable to foreign-rights holders to 25 percent of gross box office. Hollywood wanted an increase in revenue-sharing films, a higher share of box-office receipts, and more access to key viewing windows in China’s ever-expanding film market. In January 2018, Beijing agreed to discuss “policies and practices that may impede the U.S. film industry’s access to China’s market,” and in April Chinese negotiators reportedly offered to raise annual quotas. But then the talks stalled amidst the contentious U.S.-China trade negotiations. And now, the same trade dynamics affecting products as diverse as soybeans and auto parts have hit Hollywood.

While Donald Trump’s re-election campaign will continue to drive his trade policy, China’s tightened capital controls and Beijing’s investigations into entertainment companies’ alleged tax evasion have decelerated the growth of China’s film industry, making it more daunting for Hollywood to do business in China. The increasingly unpredictable governments in Beijing and in D.C. are leaving Hollywood in limbo, compounding an already fraught relationship between the two countries’ film industries. The billion-dollar Chinese and Hollywood film industries have both always been calculating. Hollywood has come a long way in China since The Fugitive, the first revenue-sharing film to enter the Chinese market, in 1994. Meanwhile, China’s leaders have used the power of China’s market to advance their own political and cultural goals for the movies. This has led to a Sino-Hollywood formula that favors big-budget, high-tech, and at times pompous and hyperbolic blockbusters devoid of real political, artistic, and cultural edge.

American independent films have become collateral damage of the trade war, as Chinese regulators are keeping them mired in bureaucratic procedures much longer than normal, significantly slowing down the import process. “Things have just ground to a halt,” Kirk D’Amico, Chief Executive of the independent Los Angeles production and distribution company Myriad Pictures, told The Wall Street Journal in December 2018.

Though less susceptible to the trade war because their big-budget releases are crucial to China’s box-office growth, major Hollywood studios nonetheless face their own uncertainty in China. They fear retaliation, particularly because Hollywood films are one of the few U.S. products where imports greatly exceed exports. There is also the worry that China could renege on past agreements, for instance, by approving fewer U.S. films for import, or limiting the runs of Hollywood films to low-season periods.

With Trump in the White House, liberal-leaning Hollywood has lost its key ally in its international expansion. Hollywood is equally worried about China’s strongman Xi Jinping, who in March 2018 moved China’s film division from the State Administration of Press, Publication, Radio, Film and Television to the Central Propaganda Department, which means that all imported and co-produced films now need that ministry’s approval.

China has a firm grip over Hollywood releases on the mainland as Beijing dictates box-office revenue of Hollywood releases in China, duration, and timing—sometimes reportedly giving studios only two weeks’ notice before their film’s release date. Even if Chinese regulators were to raise the number of foreign imports, they could increase titles from other countries. Or China could impose additional taxes on Hollywood imports that would offset any increase in studio revenues. It is in Hollywood’s best interest to be on China’s good side.

Indeed, the Chinese market can make or break a film, which also increases Beijing’s aspiration to propagate its culture globally. The 2016 Hollywood film Warcraft was a critical and financial flop in the U.S. Yet it grossed roughly U.S.$213 million in China, prompting speculation that producers could conceive a sequel to Warcraft solely for the Chinese market. The Hong Kong martial arts film star turned Chinese cultural ambassador Jackie Chan remarked, “Warcraft made 600 million [renminbi] [U.S.91 million] in two days. This has scared the Americans. If we can make a film that earns 10 billion [renminbi] [U.S.$1.5 billion], then people from all over the world who want to study film will learn Chinese, instead of us learning English.” Will Hollywood start speaking Chinese, literally and figuratively? In some ways it already does, judging by the number of Hollywood films with flattering Chinese plotlines and characters, some of whom do speak Chinese.

China’s goal over the last decade has been to draft Hollywood into promoting Chinese soft power. Early examples of co-productions—movies jointly produced by China and a foreign studio—mostly utilized Hollywood investment and talent, with some sanitized Chinese images added to the mixture. With a larger war chest fueled by their growing market, China now can simply hire Hollywood stars to tell a China story. For example, the 2016 Sino-Hollywood epic fantasy adventure film The Great Wall featured a group of European mercenaries joining the Chinese army to defend the iconic structure. Still, the film came out to overwhelmingly bad press in China, and Beijing even cracked down on negative reviews. The film grossed U.S.$334 million worldwide against its U.S.$150 million production budget, but it was not a soft power success.

China’s film industry also attempts to manufacture its own global blockbusters, in Mandarin-language films and featuring China’s own action heroes. 2017 Wolf Warrior II, a Chinese version of Rambo: First Blood featuring a muscular Chinese hero fighting rebels and Western mercenaries in a nameless African country, grossed U.S.$870 million. Not a co-production, Wolf Warrior II utilized U.S. talents to showcase China’s largess in Africa and its newly amassed international power. But the jingoism cloaked as Chinese patriotism and the racist depiction of the nameless and witless Africans clash with contemporary sensibilities. The world is not thrilled to banish American saviors only to witness the arrival of Chinese ones. The film failed to capture hearts and minds of audiences outside China, grossing U.S.$2.3 million in the North American market; its China box office accounted for 98.1 percent of its total gross.

One way to deal with the hazardous nature of nationalist power projection is to sidestep it while showcasing China, like with the 2018 blockbuster hit The Meg (2018), about a giant shark wreaking havoc on a tourist town in south China’s Hainan province. The Meg’s Chinese partner attributed the film’s success to the fact that it went “easy on cultural references,” a rare acknowledgement of the aversion of global audiences to heavy-handed Chinese cultural propagation. Still, the film is unmistakably Chinese, featuring Chinese characters and iconography. The Meg has become the highest-grossing live-action co-production and a milestone breakthrough: its box-office receipts evenly distributed among the U.S., China, and the rest of the world, a rare instance of a successful cultural cross-over. Left to their own devices and equipped with Hollywood’s know-how, Chinese filmmakers are getting better at telling China stories with universal appeals. The Wandering Earth, a post-climate-change disaster film released over the Lunar New Year has received some positive reviews in the U.S. “I can’t think of another recent computer-graphics-driven blockbuster that left me feeling this giddy because of its creators’ can-do spirit and consummate attention to detail,” wrote “The future is here, and it is nerve-wracking, gorgeous, and Chinese.”

The Party-line and the bottom-line have converged to manufacture global blockbusters of Hollywood scale with Chinese characteristics. As China’s shining new image ascends the cinematic horizon, political control remains a daunting obstacle for Chinese filmmakers. As the popular blogger and novelist Han Han argues, “the restriction on cultural activities makes it impossible for China to influence literature and cinema on a global basis or for us culturati to raise our heads up proud.” Recently, the withdrawal from the Berlin Film Festival of Zhang Yimou’s film One Second citing “technical reasons” triggered immediate speculation of political censorship. Whatever the real reason, the concern over censorship has been the overriding narrative when it comes to the reception of Chinese film. In 1999, Zhang Yimou pulled two of his films, Not One Less and The Road Home, out of the Cannes film festival arguably to protest what he saw as political bias by the festival’s organizers, who he claimed preferred Chinese films critical of the Chinese government. While the political spasm of Chinese censors continues to stymie creativity, Western media’s singular focus on censorship risks reducing Chinese film to mere political discourse. The Sino-Hollywood negotiation is only one small piece of a larger puzzle in the Sino-U.S. relation, which is frequently dictated by elections in the U.S., Party politics in China, and the state-industry alliance in both China and the U.S. as personalities and film events intersect with larger domestic and global forces.