The overall Chinese economy seems to be slowing down. Certain aspects of the economy, however, are growing fast. Fueled by an expanding middle class and the State government's effort to transition from a manufacturing economy to a service one, the movie industry is growing at an extraordinary pace despite the downward pressure of the overall economy.

In fact, China is now the world's second-largest film market and its gross box office sales are likely to surpass those of the U.S. by the end of 2018.1 In 2015, China's box office revenue reached the sum of 6.78 billion USD, recording an increase of 48.7% over 2014 and 349.1% over 2010.2 With box office revenue of 11 billion USD in 2015, the U.S. still occupies the top position, but it will not be for much longer given the inverse trend of American and Chinese movies and the potential presented by China's enormous population.

Although 2015 was a record year for American box office sales, the number of successful movies was unimpressive. "The takeaway is that we ha[d] a record year, but it was concentrated among fewer films. The top 10 films in 2014 represented 24 percent of the pie. The top 10 films [in 2015] represent[ed] 34 percent. There is no bottom anymore." said Fox domestic distribution president ChrisAronson3 Apart from this, in 2014 the U.S. box office revenue registered a decrease of 5.13% over 2013. On the other side of the Pacific, the cultural and cinematographic movement has recorded a noteworthy development in recent years. Chinese films took an impressive 62% of the market in 2015. In the same year, Stephen Chow's "The Mermaid" broke all-time records by becoming the first movie in mainland box office history to pass the 3 billion yuan Although 2015 was a record year for American box office sales, the number of successful movies was unimpressive. "The takeaway is that we ha[d] a record year, but it was concentrated among fewer films. The top 10 films in 2014 represented 24 percent of the pie. The top 10 films [in 2015] represent[ed] 34 percent. There is no bottom anymore." said Fox domestic distribution president Chris Aronson.iii Apart from this, in 2014 the U.S. box office revenue registered a decrease of 5.13% over 2013. On the other side of the Pacific, the cultural and cinematographic movement has recorded a noteworthy development in recent years. Chinese films took an impressive 62% of the market in 2015. In the same year, Stephen Chow's "The Mermaid" broke all-time records by becoming the first movie in mainland box office history to pass the 3 billion yuan mark.4

Further, there is room for many more screens in China. Despite being the country with the second most screens in the world, China's 1.4 billion population is still underserved. In comparison, the U.S. has about 40,000 screens, which translates to roughly one per 8,000 inhabitants. In order to reach a similar level of density, the Chinese government has promoted a boom of screens and movie theaters construction. Consequently, cinema screens in China increased from 3,527 in 2007 to 31,627 in 2015. That is an average of 22 screens added every single day.5 Most of these screens were built in small cities and rural areas to catch up with metropolitan areas. As a result, per capita theater visits are also predicted to increase. Currently, a Chinese goes to movie theaters only 0.8 times a year on average, whereas an average American goes 3.22 times and an average South Korean goes 3.87 times per year.6 Such data reveals that great potentials still exist in the Chinese movie industry.

The Film Industry Promotion Law

Even though domestic films were already performing strongly in China, the National People's Congress issued a draft of the People's Republic of China Film Industry Promotion Law ("Film Industry Promotion Law") on November 6, 2015 to further boost China's exploding film market and bridge the gap between domestic and foreign movies in technologies, capital, talents, and contents.

Concerning the lack of screens and movie theaters, the Congress has promised to increase support for rural film screenings, to continuously improve the capacity of film viewing in rural areas, and to provide the people with exceptional, quick and easy film viewingservices.7 The local governments are to pay to establish and improve service networks for such screening Concerning the lack of screens and movie theaters, the Congress has promised to increase support for rural film screenings, to continuously improve the capacity of film viewing in rural areas, and to provide the people with exceptional, quick and easy film viewing services.vii The local governments are to pay to establish and improve service networks for such screening services.8 In addition, local governments are required to "include the construction and reformation of movie theaters into the people's economic and social development plans, culture industry development plans, overall land use plans and urban and rural overall construction plans."9

The Film Industry Promotion Law is also aimed at encouraging "financial institutions to provide financial services to those engaged in film activities, (...) to support development of the film industry in terms of credit and other aspects," as well as requiring "financial security institutions to provide financial guarantees for the film industry in accordance with law."10 Moreover, the State mandates better capital, funding, financial and accounting systems to increase investment in the film industry, and declares to implement "tax incentive policies to promote the prosperous development of the film industry."11

Download >> A Top-Down Approach: Tax Incentives And Their Effect On The Chinese Movie Industry

Footnotes

1 Rob Cain, China's Movie Industry is Growing Faster Than Any Other Country's Anywhere, Any Time, Ever, Forbes (June 26, 2015), http://www.forbes.com/sites/robcain/2015/06/26/chinas-movie-industry-is-growing-faster-than-any-other-countrys-anywhere-any-time-ever/#1c74d8695051.

2 Patrick Brzeski, China to Reward Cinemas for Favoring Local Films Over Hollywood Imports, The Hollywood Reporter (March 27, 2016), http://www.hollywoodreporter.com/news/china-reward-cinemas-favoring-local-878541.

3 Pamela McClintock, Box Office 2015: How Revenue (Narrowly) Hit a Record $11B in the U.S., The Hollywood Reporter (December 29, 2015), http://www.hollywoodreporter.com/news/box-office-2015-how-revenue-851167.

4 Patrick Brzeski, China Box Office Grows Astonishing 48.7 Percent in 2015, Hits $ 6.78 Billion, The Hollywood Reporter (December 31, 2015), http://www.hollywoodreporter.com/news/china-box-office-grows-astonishing-851629.

5 Tang Yue, Holiday Upsurge Leads to Record-breaking Box-office Revenues in 1Q, China Daily (April 4, 2016), http://www.chinadaily.com.cn/china/2016-04/04/content_24264686.htm

6 Patrick Brzeski, supra note 4.

7 Article 30 of the People's Republic of China Film Industry Promotion Law (Draft).

8 Id.

9 Article 39, Id.

10 Article 40, Id.

11 Article 38, Id. 

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