China to surpass the U.S. as the world’s top film market

September 9, 2019 — by Emilie Zhou

Two days before the long awaited “Avengers: Endgame” was released in the U.S., thousands of residents in China were already rushing to watch it in local theaters. Not only was the film incredibly successful in the U.S., but according to Variety Magazine, it was also extremely popular in China, earning around $616 million in box office revenue. “Avatar” became the highest-grossing movie of all time also because it was a hit in China. 

According to Variety, “Endgame” along with other Hollywood films have benefited from the “lack of competitive Chinese content” in China. Although China has been building more movie theaters for residents, new tax regulations and government restrictions have led to a slowdown in local production. Heavy censorship from the government has also stifled creativity, as the government tends to dislike revolutionary and political stories, preventing a number of films from being displayed at top festivals. 

“The government views the entertainment industry as a tool to boost the country’s global image, encourage nationalism and promote ‘mainstream values’ deemed appropriate by the Communist Party,” Variety author Rebecca Davis said. “One of the top slogans under President Xi Jinping has been an exhortation to content creators to ‘tell the Chinese story’ to the world through positive narratives that don’t portray China as a global threat.” 

But despite government restrictions and regulations, China still continues to be a highly successful market with an expanding and evolving entertainment industry. Not only is China leading the way in the digital space, but according to a study conducted by PricewaterhouseCoopers, China is also predicted to surpass the U.S. in box office revenue and overtake the U.S. as the world’s No. 1 film market in the coming year. It’s estimated that by 2020, China’s box office revenue will be around $12.28 billion while the U.S. will only earn around $11.93 billion. 

“Twenty years ago, the [entertainment] industry here [in China] was practically nonexistent, and 10 years ago, it was a fraction of what it is now,” former Qingdao Oriental Movie Metropolis studios production director Tommie Curran said to Variety. “If you criticize [China] on something today, you need to realize that in three years’ time they’re going to rapidly improve, and that in seven years they’ll be even better.”

China currently has more paid subscribers on streaming-video services than all the other users in the world combined, although popular streaming services used in other parts of the world, like Netflix and YouTube, have been blocked. Instead, most of China’s 800 million internet users are using Tencent Video, Alibaba’s Youku and iQiyi for streaming services.

According to Variety, China has a quota for the number of U.S. films that can be imported each year, but numerous international films, including Hollywood’s “The Lion King,” which earned over $117 million, have been well received in China. China’s large population also makes the success of films there even more valuable and important to the U.S.

Despite the success of foreign films,  Chinese productions have also become increasingly successful and popular among residents. For example, in the past six months, “The Wandering Earth,” a science fiction film about astronauts guiding the Earth away from an expanding sun to save the planet, has become China’s second highest growing film ever. The film has earned $691 million, which could be compared to how much “Black Panther” earned in its domestic box office after its release. 

According to Citic Guoan New Bridge Studios president John Qu, China has been learning from the West, but is trying to become more independent as they’ve realized that “Western strategies of production or content development” may not always be as successful in China. 

“Gone are the days of China simply buying up U.S. companies for silly prices, naively entering into often unfavorable slate-finance deals or partnering in collaborations,” Davis said. “The mainland is now looking to do things its own way, and has big ambitions to create works that can both tap into its huge local market and make waves overseas.”

While China may be seeking to create more appealing content for its audience, they may still need to rely on the U.S., as a lack of experience in screenwriting and production still remains and has created “a continuing need for Hollywood’s superior know-how,” Davis said. 

However, as economic tensions between China and the United States increase, some fear that conflicts, including the trade war, could also affect and target the entertainment and film markets of the two nations. According to the Washington Post, there are growing signs that China is already “quietly retaliating against the U.S. entertainment business.” For example, when the “Game of Thrones” finale did not air on Tencent as it was supposed to, some suspected that the decision was partially influenced by the trade war.

This could potentially hurt the U.S. as international movies have to be approved by the Chinese government first before being distributed and displayed throughout China. Tensions with China could jeopardize the chances for new U.S. films to be shown abroad.

“If the trade war wears on and the market remains cut off, it could result in a reduction of the budgets of studio movies, since it’s Chinese Yuan that make them possible,” Washington Post writer Steven Zeitchik said. 

The film market in China has become increasingly important to the U.S. entertainment industry, but the strained relationship between China and the U.S. could make it dangerous and risky for the U.S. to rely on China’s market. 

"It's Hollywood, it's a strong industry for America and it's symbolic," international lawyer Dan Harris said to the Telegraph. "With the film industry there are levers China can pull and push as much as they want. That's what we're hearing they're now doing. It's a matter of degree, but it's being ramped up and and it will continue to escalate."