JUMP CUT
A REVIEW OF CONTEMPORARY MEDIA

copyright 2007, Jump Cut: A Review of Contemporary Media
Jump Cut, No. 49, spring 2007

Hollywood’s crusade in China prior to China’s WTO accession
p. 2 text version [go to page one of text version]

Meanwhile, Valenti, on behalf of the Hollywood studios, made unremitting efforts to try to assuage the Chinese government. He stressed in his signature, hyperbolic style that a few specific films can not possibly “disrupt or collapse a culture richly fertilized by several thousand years of historical glory," and should not “interrupt the long range beneficial interests” of both sides (Valenti 1997). He also emphasized to the visiting Chinese Minister of Radio, Film and Television, Sun Jiazheng, in late 1997 that individual films only exert a very brief though loud repercussion on the U.S. collective imagination (Stern 1997). While the disappointing box office of Kundun (grossing US$5.53 million with a budget of US$28 million) and perhaps, to a lesser extent, Seven Years in Tibet (grossing US$37.9 million, low only relative to its budget of US$70 million) seemed to somewhat back Valenti’s claim in financial terms, the two film s’ actual impact in the U.S. were by no means negligible.

Their production rationale was also worth noting. As one U.S. journalist observes, thanks largely to the two Hollywood films, “…now, whenever the Dalai Lama visits, he’s greeted by crowds befitting a rock star," due to the hot spiritual trend in the U.S., of which Buddhism, particularly Tibetan Buddhism, constitutes one major religious foundations (Hogan 2004). Meanwhile, the images and messages of the two films have undoubtedly helped reinforce the Dalai Lama’s long-term effective publicity for his cause in the U.S. that runs counter to the official stand of the PRC government. Interestingly, even Red Corner, which was partially shot surreptitiously in Beijing with execution footage, and in which “the Nazis seem preferable to the Chinese Communists," starred Richard Gere, one of the prominent and ardent supporters of the Dalai Lama in Hollywood (Marchetti 2004). And the three films happened to coincide with Hong Kong’s return to mainland China, appearing to remind the world of “America’s prerogative to question Chinese legal institutions and claims to sovereignty” (Marchetti 2004).

Media critics in China considered the three films as

“laughable gimmicks…elaborately cooked up for the sake of ‘demonizing’ China."

They attributed Hollywood’s presentation of “untrue," negative images about China, which are consistent with the U.S. mainstream ideological standards, to the “uniformity of consensus” between the increasingly oligopolistic U.S. entertainment industry and the U.S. government. In other words, the “profits correlations” between the two sides, according to the critics, “promote the worldwide expansion of the mainstay U.S. industry under their political auspices," and “conform entirely to the national interests and overall strategy of the U.S." (“A Renewed” 2003, 50). In this sense, it becomes natural for Hollywood as Washington’s reliable collaborator to serve its government’s ideological objective consciously, and meanwhile for the U.S. government and the MPAA to defend the three films on the sole basis of their pure commercial pursuit on the diplomatic front.

While the unexpected scenario kept Valenti busy trying to assist the three studios to re-open channels of business cooperation with China, especially MGM, which had remained largely passive in its own conciliatory efforts, Valenti did not neglect his paramount mission of expanding market access for the major studios in China. Valenti paid a visit to China in late March of 1999, as part of a trade mission led by U.S. Commerce Secretary William Daley. He met for the first time Ding Guangen, head of China’s Ministry of Publicity, who oversaw SARFT and the Ministry of Culture and was known among other senior Chinese officials as the conservative cultural czar of China. Valenti's primary efforts to persuade the Chinese government to accept his proposal to import 17 U.S. films in 1997 and 25 the next year[38] did not bear fruit. His other major request for allowing U.S. companies to build cinemas in China also failed to draw a commitment from top Chinese officials, including Chinese Premier Zhu Rongji. Nevertheless he announced to Chinese officials at those meetings the plan of the MPAA and its member studios to host a Chinese film festival in the US in October that year. His ultimate intention to foster a détente between the two sides, and especially to engender some good-will from China that could lead to easing market barriers for Hollywood films, can be easily read from his diplomatic hyperbole:

"This festival is a demonstration of our commitment to the future of the global film community….We firmly believe that sharing the work of China's finest filmmakers will unveil to new audiences the tremendous creative talents that reside in this great nation and, perhaps, encourage China to open its screens to more films from abroad…."

"It is my hope that the new millennium will bring us closer to a time when each of our nations can freely share the many wondrous, magical stories we yearn to tell….Perhaps the festival will one day be looked back upon as a significant step toward that most worthy goal" (Boliek 1999a).

“Free” sharing of films has never existed. There has been no “free trade” in films, between the U.S. and China, in the name of which the MPAA has consistently fought on behalf of the Hollywood majors, by lobbying the U.S. government to press for the lifting of any protectionist tariffs and quotas from China. It probably will not happen anytime in the near future. The flow has been almost totally one-way. According to China Film, U.S. films have accounted for the majority of films imported on a revenue-sharing basis in China. Among 65 revenue-sharing films imported from 1994 to 2000, 48 (74%) were from the U.S., with the rest from the U.K. and Hong Kong. From 1995 to 2001, a total number of 134 films were imported from the U.S., 61 of which were big revenue-sharing films. Nevertheless, over the same period, no Chinese film was released via U.S. mainstream, commercial cinema chains.[39] On many occasions, China’s requests for reciprocity in film trade, at least to some degree, were invariably turned down by the MPAA on the pretext that Chinese films, like most other foreign films, simply will not sell in the U.S.. Among other reasons, the MPAA claimed, the films simply do not appeal to the mass U.S. audience, who rarely can stand subtitles, much less dubbing. As a matter of fact, the fortressed, oligopolistic structure of Hollywood[40] has successfully blocked the vast majority of foreign films from getting into the U.S. market, much less its mainstream commercial cinema venues. Hence the U.S. film market has essentially been kept for U.S. domestic films, particularly those by major Hollywood studios, without the need to impose any explicit quotas and tariff. The following complaints by U.S. independent producers help explain the challenges, of a similar nature but to a greater extent, faced by foreign producers in gaining market access in the U.S., which seem to be perpetuated by the oligopoly of the Hollywood majors.

"Independents accuse the majors of being too lacking in vision to recognize the merit in their films (and therefore refusing to distribute them) or having distributed them, of marketing them incompetently so that they do not make money; or having distributed and marketed them well so that they generate a great deal of revenue, of cheating them out of their just share of the profits" (Prindle 1993, 17).

The imbalance in film trade flow that favors Hollywood will only be exacerbated with the other side's quotas and tariff protection being torn down by an aggressive U.S. trade policy in order to promote alleged “free” trade. Yet to appease the Chinese government, major Hollywood studios sent representatives to Beijing Screen, an annual showcase and market of Chinese films organized by China Film since 1996, as well as the Film Market section of Shanghai International Film Festival (SIFF). They went through the motion of selecting films made in China for potential release in the U.S.. In early 1998, the President of China Film, Tong Gang, signaled Hollywood that in making film-import decisions his company would give preferential treatment to foreign companies that acquired Chinese films for distribution overseas. This changed the role of Hollywood majors in Beijing Screen and SIFF from mere observers to “active” participants, approaching China Film and Chinese studios with much good-will intent to discuss prospective arrangements for distribution (Ying 1998, 1). However, in the end, even for the very small number of Chinese films that reached deals,[41] only the luckiest few ended up in U.S. art houses on a very limited scale.[42]

As the year 1999 unfolded, China’s bid for WTO status, starting with WTO's preceding body GATT, had gone on for 13 long years. The bilateral relation, already marked by disputes over human rights and other issues, were further strained by the bombing of the Chinese embassy in Belgrade by U.S.-led NATO. This incident led to another temporary halt of business between the Chinese film industry and Hollywood. The two governments were both eager to arrive at a breakthrough agreement within that year to end the stalemate. During Chinese Premier Zhu Rongji’s state visit to the U.S. in April 1999, China made major concessions following four days of strenuous talks, agreeing to open up the country’s insurance and telecommunication sectors, and to lift restrictions on U.S. agriculture imports. Nevertheless, Zhu failed to get an official nod from Washington for China’s bid for the WTO as he wished. Not surprisingly, the issue of Hollywood’s market access to China was prominent among the several major remaining obstacles to a final agreement. However, heavyweight media moguls from Hollywood, such as Gerald M. Levin of Time Warner and Michael Eisner of Disney, were among the handful to be given access to private meetings with Zhu during his state visits in New York and Los Angeles respectively. Although the meetings were not made public, they would inevitably involve the two media giants’ China dreams. Given the common undeclared conviction that Hollywood’s clout has overtaken that of the U.S. State Department and Defense Department on the world stage, and the MPAA’s well-known alias, “Little State Department," those exceptional opportunities for private meetings with China’s Premier came as no surprise.

In June 1999, while testifying before the Trade Subcommittee of the House Ways and Means Committee, Valenti strongly urged the U.S. government to secure China’s commitment to improve the Hollywood film sector’s access to its market, which, according to him, “must be part of any acceptable WTO accession package with China." With an estimation of the industry’s annual loss of US$200 million due to restrictions in the importation and distribution of Hollywood films as well as to video piracy in the country, the goal Valenti set for the MPAA in the WTO accession negotiation was “to secure a gradual increase in the number of films” into China (“Valenti Supports”). Then in the fall of 1999, as promised, the MPAA, with the firm collective backing and financial sponsorship of Hollywood majors, hosted a bicoastal Chinese Film Festival in New York and Los Angeles.

The film festival featured ten Chinese films, and coincided with the 50th Anniversary of the founding of the People’s Republic of China. A Chinese film delegation headed by China’s top film official, SARFT Vice Minister Zhao Shi, attended the festival. Seizing upon the occasion to advance relations with the Chinese government that it believed vital to its future business opportunities in China, Twenty Century Fox, whose Titanic set the box office record in China, offered to be the primary host of the Los Angeles leg of the event, providing exhibition venues and setting up grand receptions. Disney and Sony Pictures, who wished to clear away any lingering effects of their Tibet films in hindering their co-operation with China, exhibited no less hospitality and good-will toward the delegation, from senior-level business meetings to specially arranged and guided tours to their theme parks or studio facilities to a series of other entertainments. It was during one of the dinners hosted by Sony Pictures that the studio announced its plan to co-produce their first Chinese-language film, Crouching Tiger and Hidden Dragon, which later would turn out to be a smash hit in the U.S. and much of the world.

About one month later, with the signing of the Sino-U.S. agreement on China’s accession to the WTO on November 15, 1999,[43] Hollywood’s desires in the Chinese market, realistically moderate as they might appear compared with their ultimate goal there, seemed to be reasonably fulfilled, with significant concessions on the Chinese side. The commitments made by the Chinese government in the audio-visual sector under the historic agreement included:

Liu Jianzhong, former Director-General of the Film Bureau at SARFT, represented the Chinese film sector in the WTO negotiations. He later acknowledged that the U.S. side pushed hard to eliminate China Film’s monopoly over film import and to engage directly in film distribution in China. Their requests, however, were turned down by the Chinese side (Liu, Jianzhong 2002). Though the actual confrontations and bargaining between the two sides during the negotiation would remain mostly an historical enigma, the tense emotions can be perceived from one scenario on the side of China. Following one of the six days of grueling negotiations, all the Chinese delegates went to China Film one evening to see a newly finished Chinese film, My 1919. It tells the story of Chinese diplomats saying NO, for the first time in history, to the Western powers at the Paris Peace Conference at the end of WWI. China’s Chief Trade Representative suggested on the spot its sequel be filmed with the title of My 1999 (Zheng 2000, 4).

In the area of film, the agreement required China to make some immediate reductions in film trade and investment barriers. Yet, at the same time, it allowed China to retain some level of protection for its film industry. Fortunately, China was able to maintain its screen quotas (2/3 of all screen time for domestic films) in accordance with the Special Provisions on film trade in Article IV of the legal text of GATT, which were inherited by its successor organization, the WTO, as follows:

The rule on screen quotas is stipulated in China’s “State Regulations," promulgated by the State Council. The same official document subjects every foreign film to imperative film censorship prior to its import to China, a practice not uncommon in other national film industries. It offers another means by which the Chinese government can bar undesirable films from the market, and can give China a reasonable control over foreign films’ market entry. The fact that the Chinese side was able to include in the agreement this one principal precondition of abiding by the Chinese “State Regulations on Administration of the Film Industry" for bilateral film relations, gave the Chinese government reasonable leverage to protect its film market.

As for the U.S. side, they eventually succeeded in raising the unofficial quotas for film import and in lowering other trade and market access barriers for Hollywood business in China. As some U.S. delegates attending the WTO negotiation “confessed” rather diplomatically, they made a request about Hollywood’s market access in China and pushed it hard in response to the enormous domestic pressure that they faced. Given that the copyrights-based industry has become the Number One U.S. export industry since 1996, of which Hollywood film is the primary driver, and given that the U.S. government is the staunch supporter of corporate interests overseas, U.S. trade negotiators simply could not afford to go back empty-handed on film (Zheng 2000, 4).

The agreement was not entirely satisfactory to Hollywood majors. Yet, it was still welcomed by the Hollywood business community. In particular, Valenti knew that the MPAA had come a long way to get that important, albeit small, open window. Again, in his stylistic rhetoric, Valenti hailed the agreement as a “heartening," long-awaited breakthrough. He certainly hoped that the small advancement could later lead to a significant transformation in Hollywood’s business prospects in China. Hence he implied that it was just the beginning of an aggressively expanding penetration yet to come:

"We are joyful that our friends in China have recognized the worth of American films in their country….We look forward to working with China Film so that the American films that enter China are given the widest distribution….This bodes well for the future" (Boliek 1999b).

The issue of granting China PNTR (Permanent Normal Trade Relations) status was closely intertwined with the above-mentioned trade agreement and China’s accession to WTO. U.S. law required China’s normal trade relations (NTR) status (also known as most-favored-nation, or MFN, status) to be reviewed and renewed on an annual basis. From 1980, when NTR status was restored to China after being suspended in 1951, to 1989, the renewal of China’s NTR status was largely non-controversial and relatively unopposed by Congress. Following the Tiananmen Square incident in 1989, however, many members of Congress sought to use the annual renewal as a focal point to pressure the executive branch over a wide range of Chinese trade issues (e.g. trade barriers, IPR enforcement), and non-trade matters (e.g. Taiwan security, weapons proliferation). They wanted to condition that status on meeting additional requirements, primarily regarding China’s human rights record. In May 1994, the Clinton Administration decided to de-link human rights from trade concerns, separating human rights considerations from the annual review of China’s NTR status.

China's gaining the status of PNTR would end the annual Congressional review of China’s trade status, and it also would greatly benefit multinational corporations, including Hollywood media giants, which have increasing business interests and stakes in China. Besides, during the bilateral negotiation over China’s WTO accession, the Clinton Administration pledged that it would press Congress to enact PNTR legislation in return for significant market-opening commitments on the part of China (Morrison 2002). Hence, once the agreement was reached in November 1999, the Clinton Administration and its business supporters began to push for Congress to grant PNTR to China. They argued that China would accede to the WTO with or without Congressional approval of PNTR status, but the failure to pass such legislation would seriously damage Sino-U.S. commercial relations. It would also prevent the U.S. from enjoying the full benefits of the WTO agreement that the Administration negotiated, including broad market access, special import protections, and rights to enforce China’s commitments through the WTO dispute resolution procedure. U.S. competitors within the WTO, on the other hand, could benefit fully from the new business opportunities in China (“Testimony of Ambassador”). Hence, the Administration contended that the legislative grant of PNTR to China would be critical to China’s WTO membership in terms of its promotion of the U.S. economic interest.

As expected, the MPAA did not spare any efforts in lobbying the Congress to grant China PNTR status (Valenti quickly made his good-will endeavors in this regard well known to senior Chinese government officials). In February 2000, the MPAA organized a high-profile China Trade Relations Committee, to lobby the Congress to approve PNTR with China amid strong opposition from organized labor and human rights groups. The Committee was composed of its member companies’ most influential media tycoons — including Michael Eisner of Walt Disney, Rupert Murdoch of News Corp, Sumner Redstone of Viacom Inc., and Gerald Levin of Time Warner. Heading the newly formed alliance, Valenti pronounced that he and other committee members believed it in the long-term interests of the U.S. “that a sensible, enduring relationship with the largest nation on earth” be put in place (“Valenti Announces”). He admitted Hollywood’s increasing dependence on foreign markets, necessitated by its “skyrocketing budgets, low profit margins and star salary system," to be one of the major causes for him to form a “very, very high-level committee” committed to lobbying Congressmen to approve PNTR with China (Bromley 39).

In 1996 Valenti had publicized his international agenda during his first public outing as head of the MPAA, when China began to be shaken by Mao’s Cultural Revolution, with his premise of

“enlarging the foreign market, by bringing US pix to emerging nations which will in time come to enjoy more leisure time, after the present ‘ferment’ in the new nation leads to a ‘more decent’ standard of living (Quoted in Bromley 39)."

In fact, as early as in 1952, Eric Johnston, Valenti’s predecessor and President of the MPAA from 1945 to 1963, noted that Hollywood should start to consider exploiting new markets rather than rely on existing ones, for, though the Europe market was still a major revenue source, it was becoming increasingly static. In particular, he recommended that the major studios look to such markets as Africa and the Far East, where the movie-going habit was still in its infancy. He emphasized that, though they may initially be low-income areas, they would offer potentially wealthy markets in the long run (Guback 1969, 98). Hence, in the case of China, the agenda of the MPAA had to come a long way before it could be gradually materialized.

Thanks to the rigorous support of the Clinton Administration and the lobbying of major U.S. business interests, including those from Hollywood mobilized by Valenti, following weeks of intense debate, the trade bill that authorized the extension of PNTR status by the United States to China was passed in both the House of Representatives and the Senate in May and September 2000 respectively. It was signed into law on October 10, 2000, ending 20 years of annual reviews of China’s trade status, and clearing the way for Hollywood’s expanded crusade into the Chinese market. The Senate passage of the bill by a vote of 83-15 seemed to signal a noticeable change in the attitude on Capitol Hill compared with that in the immediate aftermath of Tiananmen, largely endorsing the Clinton Administration’s engagement policy towards China. Democratic Senator Daniel Moynihan of New York called it one of the most important votes since WWII (Entous, 2000). On December 27, 2001, President Bush issued a proclamation extending PNTR status to China, effective January 1, 2002 (Morrison 2002).

If long-term commercial profits are the paramount incentive for the Hollywood majors’ struggle to enter China, then to the U.S. government, the significance of the WTO trade pact with China and the ensuing PNTR bill went far beyond immediate trade and economic benefits. The Clinton Administration believed that bringing a rising power like China into the international system not only would serve the U.S. national security interest, but it also would exert a profound ideological and cultural impact on the country. As Clinton made clear when he hailed a House vote on extending NTR to China for another year in 1999,

“Expanding trade can help bring greater social change to China by spreading the tools, contacts and ideas that promote freedom” (“U.S. House Supports”).

That notion was perfectly echoed by a similar remark by Valenti in 2000,

“Trade is much more than goods and services. It’s an exchange of ideas. Ideas go where armies cannot venture. The result of idea exchange as well as trade is always the collapse of barriers between nations…” (“Valenti Announces”).

Hence, at the turn of the new millennium, China’s filmed entertainment industry and the nation’s cinematic culture as well as its overall cultural identity awaited a new round of challenges on a much expanded scale from Hollywood.

Notes

1. North served as the Motion Picture Section Chief, Bureau of Foreign and Domestic Commerce of the U.S. Department of Commerce in the late 1920s. Here he spoke on the European film policymakers’ awareness of the impact of U.S. films, which, according to him, was one reason for the quota legislation in Europe.

2. The “Big Eight” studios, as they were known back then, were MGM, Paramount, Fox, Warner Bros., RKO (Radio-Keith-Orpheum), Universal Pictures, Columbia Pictures, and United Artists. Sometimes, they were also known as the “Big Five”(MGM, Paramount, Fox, Warner Bros., RKO), and “Little Three”(Universal Pictures, Columbia Pictures, and United Artists).

3. With expanded markets for their imported films in China, Hollywood major studios increasingly employed local Chinese residents or foreign nationals who had long resided in China as their business representatives, so that they could have a better grasp of the local market as well as save money (Wang, Chaoguang 1998/9, 378). This scenario is very much paralleled in Hollywood’s operation in contemporary China.

4. For instance, one major cinema in Shanghai Dahua signed a ten-year exclusive booking contract with MGM in 1939 (Wang, Chaoguang 1998/9, 377).

5. In 1935, when MGM renewed its booking contract with one major cinema in China’s northern port city of Tianjin, the studio further demanded scheduling rights in the cinema. That is, they required that every weekend and holiday, when movie attendance was high, be allocated for the screening of films from MGM, while leaving the days of low attendance for other films. This in fact worked to the detriment of the cinema’s box office income, due to different composition of movie audiences in Tianjin and better overall reception of Chinese films in general there than in Shanghai. In middle- and small-sized Chinese cities especially in the hinterland, Chinese audiences preferred domestic films to foreign imports (Wang, Chaoguang 1998/9, 379). (This is echoed by the variances of audience tastes in geographic terms in contemporary China.) As a side note, Hollywood did not make direct capital investment in China’s cinema until 1946, when the first U.S.-owned cinema was established in Shanghai (Zhu 1998, 58).

6. On the other hand, Hollywood’s dominance in Chinese film market also stimulated the development of Chinese domestic cinema. The grave pressure from Hollywood imports awakened Chinese filmmakers’ sense of nationalism, who strove to tap into the nation’s cultural heritage and to make films that reflected social and cultural specificities of their times. As a result, a considerable number of Chinese cinematic classics were created in the 1930s and 1940s, including Spring in a Small Town, Twin Sisters, Songs of the Fishermen, Crow and Sparrow, Myriads of Light, Spring River Flows East, etc (Cheng, Jihua, Li Shaobai and Xing Zuwen 1980).

7. In 1926, the U.S. Department of Commerce created a special Motion Picture Section within its Bureau of Foreign and Domestic Commerce. In an attempt to promote the U.S. movie industry’s interest overseas, especially to counter the cooperative “Film Europe” project, i.e., “cartelization” of European film industries. That move was endorsed by the U.S. Congress after the laborious lobbies of Will H. Hays, head of the Motion Picture Producers and Distributors of America (MPPDA), U.S. film industry’s trade association established in 1922 and later renamed as the MPAA. The section began to collect information from the Department’s foreign offices as well as U.S. consular offices on the world film markets to serve the trade and to compile special reports on the motion picture industry in various parts of the world as part of the Trade Information Series (Thompson 1985, 117-8).

8. According to the report, earlier sensational types of “wild west” films, and comedies, as well as films featuring children from the U.S., were particularly popular in China. So were historical movies and love stories of an idyllic nature. Yet, films featuring social problems such as “the eternal triangle” fared poorly with the Chinese audiences and tended to lower the prestige of the American. Films featuring stories of the Jazz Age were usually not well received, especially if they involved clashes between parents and children, given China’s strong ancestor-worshipping tradition and its people’s profound veneration for their elders (North 1927, 3-4).

9. This movie was the only blacklisted film ever in U.S. film history. It was blacklisted in the 1950s during the height of the anti-communist scare (IMDB).

10. The MPAA’s eight member studios in the New Hollywood (after the end of the classic Hollywood studio era), also known as the new “Big Eight” are: Vista Buena Pictures Distribution (The Walt Disney Company); Sony Pictures Entertainment; Metro-Goldwyn-Mayer Studios; Paramount Pictures Corporation; Twentieth Century Fox Film Corporation; Universal City Studios; and Warner Bros. Entertainment (MPAA website).

11. Television did not gain mass popularity in China until the mid-1980s.

12. Given film’s unique ideological and cultural underpinnings, market reform in the film sector remained the most sluggish among all cultural sectors in China, which had already lagged behind reform in other industries and social sectors of the country.

13. Personal interview with a former government official at MRFT, Beijing, 2 August 2004.

14. This is the first film of Sylvester Stallone’s Rambo action trilogy. It tells the story about a mentally unstable Vietnam War veteran, when abused by a small town’s police force, starting a one man war with the law and order establishment. It is produced by Anabasis N.V. and Carolco Pictures at a budget of $14 million, and distributed by Orion Pictures. It is not exactly a small production in commercial terms by the standards of its time, and yet was grouped by China Film under the same second-rate category as those other imports of much smaller scale.

15. Produced by Taft International Pictures, this film is a comedy about a man who decides to declare war on the U.S. tax collection agency, the I.R.S., after his aunt dies of a heart attack while fighting the organization over 12 years. The author could not get first-hand information on why these two films were imported, but would speculate that it was politically correct for China Film to pick up such “progressive” subjects that satirize or criticize the U.S. government, given the still lingering ideological discord between the two nations in the 1980s.

16. Personal interview with a senior executive at China Film, Beijing, 25 July 2004. A side note: the price here refers to the licensing of the films’ distribution rights. Typically China Film was responsible for translating the dialogues, before passing the film on to be dubbed by one of the handful dubbing studios in China. (There have been increasing demands in recent years from the Chinese audiences in major cities to have imported foreign films subtitled instead of dubbed. But before Titanic, all foreign films reaching Chinese movie theaters were invariably dubbed, with several major dubbing actors/actresses assuming considerable star status across the nation.) The film was then distributed to cinemas across China via China Film’s regional sub-distributors. In the late 1990s, it cost about US$700 on average to make a copy of a film print, and about US$1000-1200 to make a subtitled or dubbed print in China. It should have cost less in the 1980s.

17. Wu tried to emphasize and reiterate on several occasions that the ten imported foreign films would not be confined to the top box office movies, nor would they be equivalent to Hollywood films from the U.S.. Yet, to the general Chinese public, the film imports were indeed big-budget, high-box-office mega-pictures, and even tantamount to “Hollywood blockbusters." This perception seemed to have been confirmed by the fact that the vast majority of imported films since the mid-1990s are blockbuster movies from Hollywood. It is undeniable that some of these imports are big commercial productions with remarkable artistic excellence such as The Fugitive and Forrest Gump. Nevertheless, the Chinese critics as well as audiences, after the initial amazement by and appreciation of the early imports, have perceived the films as a whole mainly from commercial and entertainment perspectives, and have increasingly regarded them as formulaic.

18. WB Chairmen/Co-CEOs Bob Daly and Terry Semel acknowledged their lofty plan to work with the Chinese side to gain “greater exposure for domestically produced Chinese films," and to advise and assist China Film in the transfer of “current motion picture technology” (Groves 1994a, 1). Author’s note: This was a tactical good-will offer, which the Hollywood majors would live up to only when they could either really benefit from it, or when it could be used as a pro-forma device to appease the Chinese side, as later developments would prove.

19. The former is a Chinese film about the heroism of members of China’s volunteer troops, also known as Chinese People's Volunteer Force (CPVF), during the Korean War. The latter portrays the heroism of the Partisan forces of Bosnia during WWII.

20. Los Angeles Times October 31, 1999, C1, 8.

21. Personal interview with a senior executive at China Film, Beijing, 25 July, 2004.

22. At the beginning of the 1990s, there were 15,000 operating cinemas in China; by 2000, the number had dropped to less than 4000. If we take 1.2 billion as China’s population, it means one theater per 300,000 people (China Film Yearbook 2002, 175). Other data sources on China’s exhibition infrastructure are also given in later chapters.

23. By 1995, China Film’s administrative control over movie imports generated 60% of its US$12 million revenue, which resulted in US$1.2 million in profits (Kuhn 1995, D1, 7).

24. Nevertheless, during the bilateral WTO negotiation in 1999, China agreed to reduce tariffs on imported foreign (mostly U.S.) films from the previous level of 9% to 5%, and to drop tariffs on home videos from 15% to 10% (“Written Testimony”).

25. A partnership cinema group between Universal Studio and Paramount Pictures headquartered in the UK and targeting markets overseas. It was the first cinema group to open a multiplex in the UK in 1985.

26. Here domestic films does not include films from Hong Kong, which are regarded as “foreign” imports till the Closer Economic Partnership Arrangement (CEPA) agreement between the Chinese government and Hong Kong SAR took effect on January 1, 2004.

27. Personal interview with a Beijing multiplex manager, Beijing, 19 July, 2004.

28. According to Valenti, the U.S. movie industry alone has a surplus balance of trade with every single country in the world, while no other U.S. business sector can make such a statement. And this comes at a time when the U.S. has some US$400 billion in trade deficits (“Valenti testifies” 2004).

According to “Copyright Industries in the U.S. Economy: the 2002 Report (http://www.iipa.com/pdf/2002_SIWEK_FULL.pdf)” by the International Intellectual Property Association (IIPA), copyright industries have continued to be one of the fastest-growing segments of the U.S. economy. The real annual growth rate of the core copyright industries (7%) have been more than twice that of the economy as a whole (3%) from 1977 to 2002. The film industry experienced a much greater rate of growth, close to 100% in five years, from US$21.5 billion in 1985 to US$40 billion in 1990. Its annual growth rate in the 1990s was comparable to that of the copyright industries’ average. And in 2001, the core copyright industries contributed an estimated US$535.1 billion to the U.S. economy, accounting for about 5.24% of its GDP.

29. Special 301 of the 1988 Trade Act passed by the U.S. Congress gives the United States an effective tool to utilize in dealing with nations that impose barriers against U.S. film, TV programs and home video products, or permit these exports to be pirated. Nations identified by the USTR under Special 301 can face a variety of retaliatory actions by the U.S. unless standards of intellectual property protection are improved. Nations designated as “Priority Foreign Countries” are claimed to have the greatest adverse impact on U.S. products and therefore are subject to trade sanctions at the end of an ensuing investigation. “Priority Watch List” and “Watch List” are two other categories that do not involve immediate trade sanctions. See IIPA website (http://www.iipa.com), under “Copyright and Trade Issues."

30. The Berne Convention for the Protection of Literary and Artistic Works, adopted at Berne in 1886, first established the recognition of copyrights between sovereign nations. It has been revised for a few times, with the last one done in 1971. The United States became a party to the Berne Convention only in 1989.

31. The IIPA is a private sector coalition formed in 1984 to represent the U.S. copyright-based industries in bilateral and multilateral efforts to improve international protection of copyrighted materials and to open up foreign markets closed by piracy and other market access barriers. It consists of the following member trade associations: The Motion Picture Association of America (MPAA), Association of American Publishers (AAP), Business Software Alliance (BSA), The Entertainment Software Association (ESA), Recording Industry Association of America (RIAA), National Music Publishers’ Association (NMPA), and The Independent Film & Television Alliance (IFTA).

32. Regarding the optical disc piracy of movies, a film is usually captured by sophisticated camcorders in cinemas, which are then used as master copies for laserdisc, video CD (VCD), and DVD replications in illegal manufacturing plants in China (Valenti cited in Hindes 1998) where there is large pool of qualified labor. Between 1992 and 1994 there were reportedly 19 replication plants in China, with 40 production lines and annual production capacity of 3 million VCDs. The Chinese government’s all-out anti-piracy offensive in 1995 drove the aboveground and more or less open piracy activities underground (Wang, Shujen 2003, 84). Another series of official anti-piracy raids at the height of underground piracy in 1996 shut down factories in southern China, which once produced as many as 75 million bootleg laserdiscs per year, and forced the pirates to relocate their facilities and activities overseas, including Macao and Malaysia, from where they have been importing unauthorized, finished yet high-quality digital videodiscs (typically subtitled versions) back to the mainland through various channels (Wang, Shujen 2003, 84-5; Valenti cited in Hindes 1998). The entry points of smuggling have expanded beyond the coastal provinces to include inland regions, including along the China-Myanmar (formerly Burma) border in Yunnan province in Southwestern China, where some of the VCDs enter China. In May 2000, China seized and destroyed 250,000 VCDs along the Yunnan-Myanmar border, which were copies of 75 different films, mostly Hollywood movies and a few Hong Kong productions. The piracy networks now operate on an increasingly global scale, involving multiple locations beyond Greater China (the mainland, Hong Kong, Macao, and Taiwan) and Southeast Asia. At present, one popular route, as confirmed by the MPAA, encompasses a “master” originated in the U.S., a “stamper” made in Malaysia or Taiwan, replication done in Hong Kong, and distribution first in the mainland, then going for the global markets (Wang, Shujen 2003, 85).

33. My personal interview with a chief representative at the MPAA’s Beijing office on August 16, 2004 has yielded the following additional information: Currently, 90% of the office’s financial and human resources are devoted to combating piracy in China, which nevertheless are closely integrated with their market access endeavors in the market. The MPAA holds that Chinese government’s censorship criteria for imported films are overly high, though the Chinese side maintains that it is fairly permissive already. Based on Valenti’s logic as mentioned earlier, the MPAA believes that the censorship, quota barriers and time lag in China’s importation of Hollywood films have given too much market space to pirated copies. If many more of the best Hollywood productions could be shown in China simultaneously as in the U.S., the problem of piracy would be very much palliated (the author regards this statement mostly a self-serving remedial claim which will not solve the root problem in practice). The MPAA’s anti-piracy budget for China is not the biggest (nor the smallest) among all Asian countries, which is shouldered by the Hollywood majors. Besides working closely with the Chinese customs, the MPAA has recruited a number of law, investigation, and intelligence analysis companies in China, especially in Shanghai and Guangdong province, as their permanent partners to track down and carry out raids on pirates. For instance, with the collaboration of those partners, the MPAA resorted to legal action to combat piracy. In August 2003, three major Hollywood studios, 20th Century Fox, Walter Disney, and Universal Studio, won a lawsuit in Shanghai against two local companies selling pirated DVDs of Hollywood films. The defendants were ordered by a local court to pay the plaintiffs compensation and to issue a public apology via the local newspaper. Through this very first lawsuit filed by foreign film companies against local video sellers in China, the MPAA wished to deter other tempted copyright violators. The organization was reportedly ready to take a series of legal actions later in the year against manufacturers and vendors of pirated discs in China [Da 2003].) In the meantime, the MPAA has been pressing the Chinese government to apply the criminal law to piracy so as to better deter violations with the threat of potential criminal penalties (piracy-related law suits in China have been resolved primarily through civil actions while criminal sanctions are seldom used). This was one major topic, along with the issue of market access, discussed between the visiting U.S. Assistant Secretary of Commerce William H. Lash and China’s State Councilor and Director of IPR Office under the State Council Song Jian in Beijing on August 9, 2004. Chinese Vice Premier and former MOFTEC minister Wu Yi has been directly involved in the bilateral dialogues on this issue. She announced earlier in 2004 that China would try to lower the criminal threshold for piracy and increase the number of infringing acts subject to criminal penalties, which was yet to effectively materialize.

34. Of course, rampant piracy has become equally devastating to the Chinese film industry and filmmakers. The Chinese government has stepped up its offensive against them. In January 2000, the government established a reward mechanism that entailed a reward of 300,000 yuan RMB (US$36,232) for each seized illegal reproduction line, an extraordinary amount in view of the low average income in China. The same year saw the launching of three major anti-piracy campaigns in the country (Wang, Shujen 2003, 87). In this sense, the pressure from the U.S. government and the MPAA for anti-piracy enforcement has played an undeniably constructive role in improving the situation to the benefit of China as well as the U.S.. This case demonstrated the positive effects for China to open up and proactively seek alignment with international practice in the ongoing process of globalization. Nevertheless, it seems unlikely that the piracy problem, with its entrenched and powerful global networks, could be completely wiped out in the foreseeable future.

35. Presumably there were officials in China’s diplomatic circle who were reasonably well informed about the U.S. political sensitivity on film productions in relation to freedom of speech, and the level of autonomy enjoyed by the U.S. corporate sector, except perhaps in anti-trust cases. They would realize the futility of attempts to reverse the scenario with a mere warning from the Chinese government, especially given the multi-million dollar sum already invested in the films’ production and the financial stakes involved. Nevertheless, in cases like this where the Chinese government believed that the image and policy of its regime, or even more broadly, China’s national image in connection with the national sovereignty over its internal affairs, were smeared, it became necessary to voice clearly its protest and act tough on the senior government level. On the other hand, this scenario also revealed the salient differences in the two countries’ political and cultural mentalities, which have contributed to diplomatic rows and disputes of a wider range between the two nations.

36. This is part of a larger localization impulse of the Hollywood majors, with evidence also displayed with other companies and in other countries.

37. Star TV’s Chinese-language cable channel, Xing Kong Wei Shi (Starry Sky Satellite TV) obtained landing rights in China’s Guangdong Province in early 2002. Then in October 2003, Rupert Murdoch was seen delivering a speech at the exclusive Central Party School of China, in which he stated that China would have the potential to become “a new global center for media and entertainment” to rival the U.S. and the U.K. He also told high-ranking Chinese officials not to fear opening up China's still tightly controlled and rigorously regulated media market (Chen and Brown 2003).

38. This coincides with the demands on film importation raised by Disney in their negotiation with the Chinese government around the same time period, as mentioned earlier in this essay. This is a typical case that manifests the Hollywood majors’ unified, trust-like operations in overseas market, under the auspices of the MPAA. As Guback noted nearly four decades ago, to be effective in its foreign operation, the U.S. film industry has always presented a united front typically through the MPAA whose mission is to represent and speak for the entire industry. “Solidarity is essential in negotiation," as only by this means can the MPAA hope to achieve the best possible operating terms for its member companies (Guback 1969, 92).

39. Personal interview with a senior executive at China Film, Beijing, 25 July, 2004. (Note: During this time period, a small number of films, mostly by the few fifth generation Chinese directors well-known in the West, have been distributed in the U.S. art houses on a very limited scale. And in the rare case of Crouching Tiger, Hidden Dragon, which got massive-scale distribution in mainstream commercial theater chains, it was a U.K./U.S./China co-production, not a strictly Chinese production. The more recent distribution of Hero and House of Flying Daggers from the mainland in the post-WTO era seems to indicate the situation is improving with an increasing reverse flow. Yet it may be safe to say, at this stage, that a real two-way flow in the film trade between the U.S. and China is still years away.)

40. The oligopoly structure within the U.S. film industry established itself in the 1910s and 1920s, and by the 1930s, the “Golden Age” of the Hollywood studios, the industry was in mature oligopoly. That is, a small number of dominant players in Hollywood were interdependent, each being vertically integrated and controlling a significant share of the market, while excluding non-integrated competitors from movie theaters. The beginning of the industry’s move towards its eventual oligopoly structure was marked by the formation of the MPPC (Motion Picture Patents Company) in 1910. MPPC tried to monopolize film distribution and absorb independent distributors by setting up the General Film Company. This development coincided with the industry’s first serious move toward blocking imports, and a while later, towards expanding distribution abroad. The Hollywood majors have continued to dominate the industry even after U.S. government’s moves to eliminate vertical integration, when the Paramount Decree of 1949 required major studios to divest their movie theater assets. Despite the dissolution of the mature vertically-integrated studio system and the transition of film production from the Fordist process to the “package-unit system” with the rise of agents, the Hollywood majors have continued to enjoy oligopolic predominance over film distribution. This has certainly helped bar foreign films, including Chinese ones, from accessing the U.S. market. See Thompson, 1985, Thompson 1987, and Hoskins, McFadyen & Finn, 1997.

41. According to China Film, these films include: Yanchuang (Inkstone) (Liu Bingjian, 1996) — the first Chinese film ever bought by a U.S. major studio (20th Century Fox) since the founding of the PRC; Xiu Nu (Feng Gao, 1996) — purchased by Warner Bros.; Gei taitai dagong (Being my Wife’s Employee) (Xu Geng, 1998); Aiqing mala tang (Spicy Love Soup) (Zhang Yang, 1998) — purchased by UIP; and Xizao (Shower) (Zhang Yang, 1999) — purchased by Sony Pictures Classics.

42. Among the above-mentioned Chinese films bought by the Hollywood majors, only Shower could be located in IMDB with a U.S. box office gross of US$1.15 million, a figure already impressive and worth celebrating for Chinese filmmakers, before Hero and House of Flying Daggers broke new ground later. (Supposedly the rest of the titles did not get theatrical release at all.)

43. The historical significance of the trade agreement to the Sino-U.S. bilateral relationship was seen by many to be comparable with President Richard Nixon’s move to open state-to-state relations with China, and President Jimmy Carter’s extension of formal bilateral diplomatic relations. The agreement, in USTR Barshefsky’s words, secures “broad-ranging, comprehensive, one-way trade concessions on China’s part” (“Testimony of Ambassador”), which cover an array of industry sectors, including industrial goods, agriculture, and services (e.g. information technology, telecommunication, insurance, banking, audio-visual industry, etc).

44. Legal Texts: GATT, 1947, WTO website (http://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm).

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