Over the past couple of years, a number of sovereign funds have emerged in China, initially to exploit the television arena, and once that proved responsive, a new focus was directed on movie production. The number of theater screens has increased an impressive 50% in the past two years, proving that there are fast-growing outlets available for new content to be seen by Chinese audiences.
Unfortunately, the indigenous, government-backed film industry can’t survive on the intermittent successes of its big budget, mega-epic, sword-wielding, martial arts blockbusters, and the Government has therefore been looking to attract foreign productions to the country (the bigger the better). This is seen as mandatory to China’s long-term media success. Providing production services for foreign producers wishing to access cheap labor in China is certainly a win-win that helps satisfy the country’s mandate to provide jobs and training to their local film industry, while also providing a pipeline for mainstream, commercial movies that can fill its quickly multiplying theaters.
Recognizing that a reliance on foreign productions is never a good model for sustainability, the Chinese government has taken the extra step of subsidizing investment funds specializing in financing independent films. These sovereign-backed film funds (some which are “managed” by Hollywood insiders) are tasked with structuring Co-Productions with movie producers such that selected projects are provided with early stage, development funding; once the potential for a film’s success becomes tangible to a fund’s directors, additional money is allocated for its production. The country’s largest film studio, China Film Group (CFGC), has a strong hand in the expansion of these programs. The China Film Co-Production Corporation, a subsidiary of CFGC, is responsible for 100% of foreign co-productions (known as Sino-foreign co-productions). According to the CFCC website, a Sino-foreign co-production is defined as a “contractual arrangement between a foreign party and a SARFT (State Administration of Radio, Film and Television) accredited Chinese party to conduct filming in China.” What’s important to note is that the China Film Group maintains not only the country’s largest studio, but also full control of a wide distribution network that owns a majority of China’s screens. This means that the “private” Chinese studios are forced to compete with the federal government to make the next big blockbuster.
SARFT, meanwhile, maintains ultimate control as the governing authority for any Sino-foreign co-production. To facilitate this, SARFT has appointed the China Film Co-Production Corporation as it’s “sole agent to assist in managing and coordinating the applications, conducting preliminary review of the screenplay and completed film, and other logistical matters relating to Sino-foreign co-productions.” Translation: The Chinese government ultimately controls everything.
Go back five years, and you’ll recall a time when hedge fund money was pouring into the coffers of studios and fly-by-night film funds. Movies were being made because they could be, not because they should be. Major, Mini-Major, and Independent films flooded the market. Distributors had their pick of the litter, but it wasn’t a very pretty litter at that. After passing on those films that shouldn’t have been made, the distributors were still saturated with films trying to find a market. The bubble popped, the music stopped.
In the U.S., many high budget films with recognizable stars ended up going straight to DVD/VOD. Hundreds of millions of investment dollars evaporated almost overnight.
Fast forward to today, each week somebody new seems to have a Chinese film fund in their back pocket, looking for films with Chinese themes, that can be partially shot in China. China-centric finance plans are combing the streets, looking for Chinese-esque movies. You can be sure screenplays all over town are being rewritten in order to qualify as Chinese Co-Productions. These new funds all claim to have money in the bank; so why then, despite all the hype and hope, are we not seeing movies actually going into production? Because the scripts can’t pass censorship. It’s no different than the myriad completed films that can’t get Chinese distribution. He who has the gold makes the rules, and in this case the rules are that the screenplays needs to conform with Chinese political ideology (or at least not question, offend or threaten the governing ideology). With some exceptions, films that meet those criteria tend to not engage mainstream audiences. If indeed these films are going into production, then you will soon see a Sino-bubble rising in the East.
This is an alluring prospect for the average US producer who’s just looking to close their next deal. I hear so many producers saying: “…as long as there is some sort of relevant Chinese content…” Appealing as that is, I challenge you to not be the average US producer — be the above-average producer. If you have a compelling project that organically checks all the boxes, then take a shot at some Chinese dough, but thoroughly understand that there are many strings attached, they can move the goal posts at will, their paper is generally not bankable, and you have no legal recourse to sue for anything, period. If your project doesn’t check the boxes, then don’t waste your time pursuing a mirage. You’ll never get that time back.