China is ramping up censorship of its movie industry ahead of its huge 70th anniversary celebrations, and Hollywood is stepping in to fill the void

china cinema wandaPeople watch a movie at a cinema in Wanda Group's Oriental Movie Metropolis in Qingdao, Shandong province, China, on April 27, 2018.Aly Song/Reuters

  • China is preparing to celebrate the 70th anniversary of the founding of the People's Republic of China.
  • In the run-up to this celebration the Communist Party has ramped up its censorship of domestic movies, with at least two long-awaited Chinese blockbusters getting unexpectedly axed this summer.
  • This censorship has in turn opened up the Chinese box office for Hollywood films to fill the void, negating fears that the US-China trade war could crush revenues for American movies in the country.
  • Experts told Business Insider that Hollywood has a "big opening" to take advantage of China's increasing censorship of domestic movies.
  • Visit Business Insider's homepage for more stories.

The ongoing US-China trade war has ignited fears that Hollywood, which is increasingly relying on China for financial success, would lose out on its biggest market.

But those fears are misplaced, experts say, and China's ever-tightening censorship on its own movies means that a gap is actually opening up for American blockbusters to fill.

China's ruling Communist Party has been particularly sensitive and paranoid over its censorship this year as it prepares to celebrate the 70th anniversary of the founding of the People's Republic of China on October 1.

china 70th anniversary tiananmen squareDecorations being set up at Beijing's Tiananmen Square on September 6, 2019, for the 70th anniversary of the founding of the People's Republic of China on October 1, 2019.VCG/VCG via Getty Images

The party is already notorious for censoring any and all content seen to jeopardize its morals or hold on power, from deleting social media posts and detaining livestreamers, to cutting out movie scenes it considers uncouth, like those depicting sex and fighting in "Game of Thrones" and or LGBT romance in "Bohemian Rhapsody."

China is in the midst of preparations for its big anniversary in October - the first significant anniversary since it emerged as a global superpower, which will be celebrated with a massive patriotic military parade.

As part of those preparations it has further ramped up its scrutiny of domestically-made movies, with at least two long-awaited Chinese blockbusters being canceled this summer.

Neither of those cancellations have been explicitly blamed on censorship concerns, but experts say that this is pretty obviously the reason.

In June, Chinese censors canceled the long-awaited box-office opening of "The Eight Hundred," an $80 million, patriotic World War II movie that focuses on the Communist Party's 1949 rivals, the Kuomintang.

Beijing blamed the cancellation on "technical reasons," Variety reported. But according to the magazine, the film was axed because the China Red Culture Research Association - a research group sympathetic to the ruling Communist Party - said the film depicted the Kuomintang too sensitively.

"It is a reversal of history, and misleads the audience. If left unchecked, it will certainly deprive the entire Communist Party of its historical basis," the group's secretary-general Wang Benzhou said, according to Variety.

Censors also pulled "The Hidden Sword," a long-awaited summer movie about about a 1930s military officer who led the Chinese fight against Japanese soldiers at the Great Wall, for "market reasons."

Again, critics are skeptical about the true reasons for the film being scrapped, and some believe it was axed because the movie's hero fought for the Kuomintang instead of the Communist Party, the South China Morning Post and Variety reported.

china firefighters communist partyChinese firefighters take an oath of loyalty to the Chinese Communist Party flag near the Great Hall of the People, Beijing, in March 2019.Ng Han Guan/AP

"Anything that deals with the [Communist] Party history or anything that's at all controversial, especially about the Chinese past, has not been allowed to show in Chinese theatres," Stanley Rosen, a political science professor and cinema expert at the University of Southern California told Business Insider.

Rosen said: "The official designation [of the cancellation] is 'technical reasons,' but it's basically censorship."

Xin Zhang, an analyst at IHS Markit focusing on Chinese cinema, told Business Insider the censorship "is not only for foreign films, but also for local films.

"It has a strict censorship for which films are going to screen in the market."

This is reflected in the decreased number of films, both domestic and foreign, shown in China this year so far. A total of 68 movies were scheduled to be shown in the country between late June and the end of August, Quartz reported in July, citing statistics from China's Maoyan movie-ticketing site.

China movie theater box office Reuters finalReuters

Chinese domestic censorship has cleared the way for Hollywood to take advantage

China's increased censorship may have tanked the release of some of its biggest domestic movies, but in doing so, Beijing has made way for American blockbusters to fill the gap.

This in turn has negated Hollywood producers' fears that China would use the US movie industry as a stick to beat Washington with in the ongoing trade war between the two countries by not importing Hollywood films.

Hollywood studios are heavily reliant on overseas box offices for revenues, with China being the most important market.

Under an official quota, China can publicly screen 34 foreign films a year. These movies generally come from countries with sizable movie industries like the US, UK, South Korea, and India, and the film producers take a cut of the box-office earnings made in China.

While countries like the UK do contribute, Hollywood films currently account for 85% to 90% of the total number of imported films in the Chinese market, Zhang said.

The quota has been surpassed in both of the last two years, and was meant to be renegotiated in 2017, but that renegotiation has been kicked into the long grass, possibly due to the trade war, according to both Reuters and The South China Morning Post. China imported 40 revenue-sharing films in 2017 and 42 in 2018, according to IHS Markit statistics.

Hollywood producers typically take 35% to 40% of the market share from Chinese cinemas, Zhang said.

US and Canadian box offices earned a total of $11.9 billion on all films last year, while China alone earned $9 billion, according to the Motion Picture Association of America

So precious is the revenue made by Hollywood movies in China, producers have even appeared to self-censor movies in order to pass censors and ensure their films are shown.

Most recently the "Top Gun: Maverick" appeared to censor itself by removing a Taiwanese flag from the jacket of its titular character, Maverick, played by Tom Cruise.

Read more: 4 times Hollywood changed movies to keep China happy

Xi JinpingChinese President Xi JinpingReuters/Pool

Having feared that the Chinese box office revenue stream would dry up as a result of the trade war, Beijing's scrapping of its own blockbusters "leaves a big opening for Hollywood blockbusters to show, even over the summer," Rosen said.

And the numbers show it:

  • "Avengers: Endgame" broke box-office records by earning $614 million in China alone in May. It made $850 million in the US by comparison, according to Forbes.
  • "The Lion King" raked in $97 million in China in July.
  • "Spider-Man: Far From Home" earned $97.2 million in its opening weekend this July.
  • "Hobbs & Shaw" earned $164 million in its first ten days in China - surpassing the $157 million earned in North America over its first three weekends, Variety reported. This was actually an underperformance in the country given the popularity of the franchise and Dwayne "The Rock" Johnson.
"Chinese people have continued to show enthusiasm in watching big Hollywood films," Jue Wang, a lecturer at the Leiden University Institute for Area Studies, told Business Insider.

Read more: 9 Hollywood movies that dominated the Chinese box office in 2018, including some that underperformed in the US

the rock china hobbs and shawDwayne &quotThe Rock" Johnson meets fans at the &quotFast & Furious: Hobbs & Shaw" press conference in Beijing, China, on August 5, 2019.Lintao Zhang/Getty

Hollywood's success at the Chinese box office in 2019 counters fears among film producers that China would stop importing American films to punish President Donald Trump over the trade war.

The Washington Post in June cited producers as saying that they are already working under the assumption of a Chinese freeze on American films, and that "the industry is operating as if it's close to a total shutdown."

"People say with the trade war, for example, is going to hurt Hollywood. But in fact for a variety of reasons the trade war has not hurt Hollywood blockbusters at all," Rosen told Business Insider.

trump xi shake handsU.S. President Donald Trump and China's President Xi Jinping make joint statements at the Great Hall of the People in Beijing, China, November 9, 2017.Reuters/Jonathan Ernst

The Communist Party's censorship isn't the only reason behind Hollywood's unexpected success in China, though.

China, in a way, can't afford to boycott all Hollywood films. The country's nascent film industry doesn't make enough movies to prop up the market alone - the US and UK each produce about 700 films a year, while China only produces 300, Zhang said.

"So they [China] do need a lot of diversity and a lot of options for cinema-goers," she said.

Another reason behind Hollywood's summer boom is that there have just been a bunch of great movies this year, and China simply doesn't want to miss out.

"Hollywood this year has had very strong titles, like 'Avengers: Endgame,'" Zhang said. "It's a very big title and has performed very well - not only in China, [but] in every country, every market."

Avengers Endgame DisneyDisney

Hollywood takes advantage, but independent US movies are suffering in China

Not all American movies are safe from the trade war, though. Independent, lower-budget films have been suffering since 2017, months before Trump began his trade war.

After Beijing ordered businesses to clamp down on investing abroad in 2017 - an effort to stop too much money from leaving the country - one of the first things that lost Chinese investment were independent films, Wang said. Trade tensions have further exacerbated this hesitancy, she said.

Rosen said: "No one knows whether the Chinese authorities are going to approve showing these films because of the trade war with the US, for example, [and] whether theater owners will show these films in theaters."

"Hollywood's doing well, but independent filmmakers are not," he added.

china movie theaterPeople walk past a poster of the Chinese-made 3D movie &quotNe Zha" at a cinema in Taiyuan, China, on August 2, 2019.Zhang Yun/China News Service/Visual China Group via Getty Images

Hollywood's China boom might not last for long, though.

Chinese regulators are "mercurial," and business with the US is "subject to geopolitical crosswinds," The Washington Post noted in its June story.

Aynne Kokas, a University of Virginia media professor and Chinese cinema expert, also told The Post that instability in the Chinese box office "poses a dire situation for Hollywood."

"It's a very dangerous financial position to be reliant on Chinese box office to recoup profits," she said.

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