China’s new global strategy

Although Chinese films had a poor showing in this year’s Cannes film festival line-up, the country’s emerging film industry made a huge splash in the Cannes Marché and headlines further afield.

The China Movie Channel sponsored the Cannes market opening party and several press conferences were held to introduce upcoming Chinese films such as Switch, Chinese Zodiac and Painted Skin 2. As in previous markets, Chinese buyers were on the prowl for product to feed the country’s booming theatrical and online video markets. Cannes also coincided with the news that China’s Wanda Group is spending $2.6bn to acquire US exhibitor AMC.

But perhaps the most interesting trend to emerge from the Chinese presence at Cannes this year is the rapidly-developing international strategy of its biggest players. Companies such as Bona Film Group and Huayi Brothers seem to be heading for a two-pronged approach. They’re not content to simply sell Chinese movies to foreign territories, although they haven’t give up on that business, but also want to work with Hollywood to create English-language product for the global marketplace.

Bona chairman Yu Dong and Huayi Brothers president James Wang were both in Cannes to talk up their ambitious slates of Chinese product. Bona signed a deal with Bank of Beijing during the market to increase its revolving credit facility to $80m to fund upcoming projects such as Tsui Hark’s Tracks In The Snowy Mountains and Jacob Cheung’s White-Haired Witch, both big-budget 3D productions.

Huayi Brothers unveiled a slate that included Wuershan’s Painted Skin 2, Tsui Hark’s Detective Dee sequel and steam-punk action drama Tai Chi 0. “Chinese films have a limited audience outside Chinese-speaking countries, so we focus on quality films that work in our region and regard all other territories as additional revenue,” Wang told Screen during Cannes.

But he added that the company is also looking to co-produce big-budget Western films, “not just as an investor, but true co-productions where we’ve involved right from the start”.

This marks a shift of strategy for Chinese companies that have previously been content to acquire Chinese rights to films that were initiated elsewhere, but later set up as Sino-foreign co-productions so they can bypass China’s import quotas. Increasingly, Chinese companies want to be involved at script stage, to ensure projects are relevant for their audience, and take a piece of international in addition to Chinese rights.

Bona is also in active talks with Western companies about co-producing English-language films. “There are two types of co-productions – one strategy is to have foreign investors in Chinese-language films who can help distribute those films in their own markets,” Yu told Screen. “The other is to set up US or international productions with a Chinese co-producer and some relevant Chinese elements in the production.”

Those relevant Chinese elements are outlined by China’s State Administration of Radio, Film and Television (SARFT) in its co-production regulations, and usually include a Chinese angle in the story and some Chinese cast. But increasingly these elements will also be a commercial consideration. Chinese companies won’t invest in films that are not going to work in their market.

Bruno Wu, founder of the $1.27bn ChinaWood film and media hub, predicted that Hollywood will remain the world’s production centre, but with East Asian box office on course to hit $10bn by 2015, will have to factor in the taste of East Asian audiences. “We want to participate in English-language global content, but with Chinese elements and talent that Chinese audiences relates to,” said Wu, who announced a $30m English-language remake of John Woo’s The Killer during his brief Cannes visit.

ChinaWood has been set up specifically to service the expected increase in Sino-foreign co-productions – offering financing, production services and distribution and marketing support. Wu’s Seven Stars Global Entertainment has also launched two funds; an $800m media equity fund, that was one of the final bidders for Summit Entertainment, and a $400m film investment fund.

“We want to bring 20-25 projects to China on an annual basis, including two to three that we develop and lead finance and 10-12 tentpoles,” said Wu. Again, the tentpoles would likely be US studio-backed films to which Seven Stars takes Chinese rights and a piece of international revenue. 

All of which is music to Hollywood’s ears. When co-production was first touted by the Chinese government severalyears back, it was embraced as a method of circumventing China’s import quotas and not a financing tool. Now China has cashed-up studios that can contribute a meaningful sum to budgets and facilitate distribution in a market where Titanic 3D recently grossed $126m or nearly half its international box office take.

This has encouraged Western companies such as DreamWorks, Fox, Legendary, Relativity and Village Roadshow to establish either corporate structures in China or active slates of co-production projects. And the recent news about widening quotas is not likely to dampen enthusiasm for co-production. Even with the new rules, a film imported to China through the revenue-sharing quota will only return up to 25% to its foreign producer, while official co-productions return around 40%.

However, it’s not all plain-sailing. Sino-foreign co-productions are still subject to Chinese censorship at bothscript stage and when the film is completed, and Lionsgate and Beijing-based Le Vision Pictures recently failed to set up The Expendables II as a co-production. Le Vision finally acquired the Chinese rights to the film and will release it as an import, day-and-date with its US release, on August 17.

Meanwhile, the industry is still pondering the recent news that US financial regulator, the Securities and Exchange Commission (SEC), is investigating the activities of the US studios in China. The SEC appears to be concerned that the studios may have paid bribes to secure co-production contracts or revenue-sharing slots.

The investigation may put the brakes on some projects, but with China set to become the world’s second biggest box office territory this year, it’s unlikely to completely dampen Hollywood’s ardour. As the following list of upcoming Sino-US projects testifies, significant money, time and energy has already been invested in the deepening relationship between Hollywood and China. It’s a relationship that is likely to have a huge impact on what we see on the big screen in coming years.

US-China collaborations in the works:

[Not all have yet been officially approved as co-productions]

Looper – China’s DMG Entertainment set up Endgame’s sci-fi thriller, starring Bruce Willis and Joseph Gordon-Levitt, as a China co-production last year.

Iron Man 3 – DMG is also co-producing the third installment in the Robert Downey Jr-starring franchise with Disney and Marvel Studios. 

Man Of Tai Chi – Keanu Reeves’ directorial debut is a Chinese-language co-production between China Film Group, Wanda Group and Village Roadshow.

Gods – Transformers and X-Men producer Tom DeSanto is developing this adaptation of a Chinese classic as a global franchise with Beijing-based Yi Shang Media.

Chinese Odyssey – Following his success with US-China co-production The Forbidden Kingdom, Rob Minkoff is setting this fantasy up as a co-production with Beijing Galloping Horse.

Two Gun Cohen – Galloping Horse is also co-producing this biopic of Sun Yat-sen’s British bodyguard, which Doug Liman is directing.

The Man With The Iron Fists – rap star RZA and Universal filmed this Russell Crowe project in China, although it’s not clear whether it’s been set up as a co-production.

The Annihilator (working title) – Dan Gilroy (The Bourne Legacy) is writing this Chinese superhero project for Stan Lee’s Magic Storm Entertainment.