Foreign movies that could be shown in Chinese theaters on a revenue basis had to go through a quota system since 1994. In China, the foreign film imports are limited to 34 a year and the foreign studios are only allowed to keep 25% of the Chinese box office revenue. Originally, the quota started at 10 per year in 1994, in 2002, as China prepared to enter the World Trade Organization, the quota was increased to 20 films per year, and in 2012, it rose again to 34 films annually, 14 of which were to be screened in 3D or IMAX formats.
But recently China is quietly allowing more foreign films to be imported as a part of a trade pact with the United States. China’s propaganda ministry (now in charge of all media-related activity in China) has relaxed the cap of annual quota of 34 films to 38 in a bid to boost the Chinese box-office returns. In a government document provided to the U.S. delegation in Beijing, Chinese negotiators said that opening up the market more for U.S. movies was a concession China could offer to Washington as part of a broader trade deal. 40 films per year can be imported on a flat-fee basis, in which Chinese companies license them for foreign distribution but do not give studios a cut of box office. The share of box-office revenue that U.S. distributors are entitled to take will move from the current 25 percent toward the international average of 40 percent, “although it might not be as large as the previous 12 percentage points increase,” Huang Guofeng, an analyst from Beijing-based consultancy Analysys International, allowed.
China’s film industry is still less developed than the mature markets of Europe or some others in Asia. This is the primary reason why China has become the biggest single export market for U.S. films. Hollywood could play a pivotal part in the massive expansion of the Chinese multiplexes and movie industry. China’s decision to increase the number of foreign film quota is a promising sign for the Hollywood movie industry.