“THE WOLF AT THE DOOR”：HOLLYWOOD AND THE FILM MARKET IN C(2)

　　Administrative Constraints

　　The importance of the China market to the American film industry was clearlydemonstrated during the congressional debate over granting China Permanent NormalTrade Relations （PNTR）。As that debate was reaching a climax in the first halfof 2000，the film industry brought out its biggest guns.A new lobbying groupcalled the China Trade Relations Committee was established and included the topexecutives from the seven major American film studios.Coordinated by MPA CEO JackValenti -who had traveled to China numerous times in an effort to pry open themarket -the committee included CEOs and other top officials from Disney（MichaelEisner），MGM（Alex Yemenidjian），Sony （John Calley ），Universal（Edgar Bronfman，Lew Wasserman and Ron Meyer ），Warner Brothers（Gerald Levin and Barry Meyer），Viacom/Paramount（Sumner Redstone ），and Twentieth Century Fox（Rupert Murdoch）。（34）What was most striking ，however，was the massive effort undertaken fora market that annually accounts for about $20million ，roughly the size of thereturn from Peru，and less than a studio might take in on one modest film in theU.S.To further put this figure into perspective，MPA statistics reveal that thetotal foreign box office for American films in 1998was close to $7billion.Inaddition，U.S.government figures suggest that film revenues from China are amongthe smallest in Asia，less than in Singapore ，Malaysia ，Thailand or the Philippines.（35）

　　The explanation for such seemingly puzzling behavior，of course，can be foundin the oft-repeated mantra that China is the largest，potentially most lucrativemarket in the world ，and normalizing trade relations is critical to developingit.As one prominent China specialist put it，in supporting Hollywood's effort ，"It's a necessary step，a historical step along a protracted ，tortuous path thatwill have many setbacks.But it's better to be on this path than not be on it."（36）What ，then ，is Hollywood's plan for developing this market and how hasthe recent PNTR/WTO trade agreement furthered these aspirations ？Before addressingthese questions ，it is useful to list some of the market entry barriers that Hollywoodfeels has restricted its success.Among the most important are the following：（1）the monopoly over imported films exercised by the China Film Corporation；（2）the prohibition Hollywood studios face in distributing their films directly；（3）restrictions on foreign investment in the film industry；（4）the informalquota that limits the number of imported films each year；（5）the structure ofthe taxation/import duty regulations that imposes a variety of fees and taxes onimported films；（6）censorship.（37）

　　Some of these obstacles are more easily negotiable than others and the tradeagreement has provided the studios some limited success in several areas，particularlywith regard to quotas and investment.First ，Hollywood has sought to increasethe informal quota on imported films from the current ten per year to as many asthe market will bear.As Table 1revealed ，the largest number of imported Hollywoodfilms in any year thus far has been nine，although that number will likely be exceededby the end of 2000.Second，Hollywood would like to invest millions of dollarsin cinema construction，particularly the building of modern multiplexes.（38）Perhaps the most important Chinese concession is an increase in the number of filmsChina will allow under the current revenue-sharing agreement from ten to twenty.Again ，to put this figure into some perspective ，it should be noted that thisnumber includes movies from all countries outside China ，including Hong Kong，and that the number of films released into theaters each year in the U.S.by studiosand independent film companies is around 500.In the initial negotiations Hollywoodhad sought a quota closer to 40films a year.A second concession allows foreigncompanies to own 49percent of Chinese cinemas.This was an important issue forHollywood executives since it is believed that the construction of additional cinemaswill eventually create pressure on China to let in more foreign films.Currentlythere is one movie theater for every 122，000Chinese ，compared with one for every8，600Americans.However，even assuming that such expectations are met ，Americaninvestors will still be subject to decisions made by the majority partner ，a governmentagency.And ，as was noted above ，economic results are still considered subordinateto social effect and the basic task of the film industry remains the building ofa socialist spiritual civilization.

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