Film Industry Promotion Law

China’s “Film Industry Promotion Law” came into effect on 1 March 2017, having been passed by the 12th Standing Committee of the National People’s Congress on 7 November 2016. A draft law was published in 2015 and it had been in development since at least 2011. It is widely described as China’s first law on the film industry and has updated arrangements between China’s and overseas film industries and formalised criteria for film censorship. The Film Industry Promotion Law follows the precedent “Regulations on the Administrations of Movies”, which came into effect on 1 February 2002 and which SAPPRFT has announced will be amended in line with the new law later in 2017 (article 17). The sixty articles within the law are wide-ranging and mostly characterised in broad terms, concerning industry accounting practices, access of foreign companies to the local market, standards of behaviour for Chinese performers, and content standards, among other things.

One factor driving this regulatory change was pressure to improve recording practices for revenue from ticket sales. Article 34 states that “Film distribution companies, movie theatres, and so forth, shall truthfully keep statistics on ticket sales and provide truthful and accurate statistical data”. In recent years, reported revenue sales have been the subject of suspicion in relation to practices by Chinese production companies, distributors, and exhibitors. On the one hand, producers and distributors have manipulated ticket sales to increase the marketing value of their films, including by bulk purchasing tickets in advance at highly discounted rates and giving them to movie-goers for free (such as occurred in relation to the 2015 film Monster Hunt, where $6.2million worth of tickets were allocated for “public welfare screenings”), and by conducting “ghost screenings”, in which shows that never take place are recorded as sold out (such as occurred for Ip Man 3 in 2016). On the other hand, exhibitors have intentionally misallocated ticket sales from one film to another, including from international to Chinese productions (such as occurred between the films Terminator: Genysis and The Hundred Regiments Offensive in 2015). Such practices affect the total revenue that international production companies are able to collect from the Chinese market, which is especially important given the significant slow-down in the expansion of Chinese ticket sales revenue from 2015 to 2016. Following the introduction of the Film Industry Promotion Law in March 2017, the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) fined 326 exhibitors for their accounting practices (Brzeski 2017; articles 47-49). In May 2017, the Motion Picture Association of America (MPAA) hired an accounting firm to conduct an audit of the box office revenue of unspecified Hollywood film(s). The ability to do so was one of two concessions granted to the US industry by China in the 2015 visit by Chinese President Xi Jinping to the US, which included talks with the MPAA.

The second concession agreed to during the discussion between Xi Jinping and the MPAA was for an increase to the total number of foreign films allowed in the Chinese market. The Film Industry Promotion Law requires that local exhibitors reserve at least two thirds of annual screening time for domestic films (article 29). Although no penalty for non-compliance with this measure has been specified, this protectionist requirement increases the value of those films granted access to the Chinese market. Foreign films can enter China on a flat-fee basis, in which case they are purchased for a single fee, or as co-productions, wherein foreign and Chinese companies collaborate to finance and produce a film. In addition, China has an annual quota for foreign film imports, which following negotiations between former US Vice President Joe Biden and then-Vice President Xi Jinping in 2012 was increased from 20 to 34. The increase of 14 films per annum required that these are either 3D or Imax films. This agreement also increased the share of box office revenue for US companies from 13 to 25 per cent. In 2016, this quota of 34 films was exceeded, with speculation suggesting this occurred to boost waning Chinese ticket sales. In the 2017 negotiations for a revised agreement, in which the MPAA hopes for an expanded quota with more favourable revenue sharing arrangements, commentators have suggested that the results of the audit of ticket revenue and potential lost earnings could be used as leverage.

Regarding censorship, the Film Industry Promotion Law is significant both for the decentralisation of censorship and for specifying the principles according to which film censorship is conducted by SAPPRFT. While SAPPRFT remains the authority responsible for film censorship, the law grants this power to both national and provincial agencies (articles 8 and 24). This move has been advocated for by Chinese film companies and will decrease the number of steps required in the approval process, as well as approval times (article 17). Lacey Zhang (2017) notes that while the 2001 regulations outline that “SAPPRFT is entitled to examine the completed scripts of all films to be produced regardless of the topic”, the recent law suggests that producers are only required to submit script outlines to SAPPRFT or its provincial agencies, while films involving sensitive topics will require the submission of completed scripts for examination by SAPPRFT (article 13). This distinction remains somewhat unclear, however, given the broad principles specified to govern film censorship in China. Films must promote “core socialist values” (articles 1 and 16) and no film should contain content that “jeopardizes national unity, sovereignty and territorial integrity” or which “defame[s] the people’s excellent cultural traditions”. A full list of content that is excluded is outlined in article 16. Article 17 states that “the specific standards for improving review of films shall be released to the public for solicitation of public comments” and this might provide further detail about the processes involved in applying these principles, including who is charged with this work. While SAPPRFT has publicly distanced the new law from an age-based classification system, article 20 states that “where a film showing might attract minors or other audiences that are physically or psychologically inappropriate, a warning should be given.” This first film subject to this requirement was the X-Men spin-off Logan (2017). – Liam Grealy

Further reading:
– Brzeski, P. (2017). Hollywood conducting first independent audit of China’s box office. The Hollywood Reporter. 27 June. http://www.hollywoodreporter.com/news/hollywood-conducting-first-independent-audit-chinas-box-office-1016930
– State Administration of Press, Publication, Radio, Film and Television. (2016). Law of the People’s Republic of China on Film Industry Promotion (November 7, 2016).
http://www.sapprft.gov.cn/sapprft/govpublic/6680/307898.shtml
– Zhang, L. (2017). China: First law on film industry effective in March. Library of Congress. http://www.loc.gov/law/foreign-news/article/china-first-law-on-film-industry-effective-in-march/