Trump’s First China-Hollywood Challenge: Renegotiate the Film Quota

An aggressive overall trade policy toward China could hurt upcoming negotiations to allow more Hollywood product into Chinese cinemas. 

U.S. President-elect Donald Trump’s administration will face its first challenge that will directly impact the China-Hollywood relationship when China’s current film importation quota of 34 per year is likely to be renegotiated in February, 2017.

China currently permits 34 films per year to be imported, from all countries on a revenue-sharing basis. This is up from an initial limit of 20 per year established when the People’s Republic of China became a member of the World Trade Organization (WTO) in December, 2001. Although that quota represents a total of films from all countries, Hollywood product receives the lion’s share of those slots, due to its popularity and profitability.

However, that limit has been voluntarily relaxed by China this year in response to sagging box office revenues, with the number of total releases approaching 40, thanks to some last-minute approval for Hollywood holiday releases, including Paramount’s Allied (间谍同盟) (November 23), Disney’s Moana (November 25) and Warner Bros.’ Sully (萨利机长) (November 29).

China’s top film regulator has hinted at his country’s willingness to expand this quota, warning film industry executives to prepare themselves for greater competition from foreign movies. “China’s film industry is not at a turning point where it would decline, but heading toward a healthy, positive and rational direction. We are confident to turn China into a film powerhouse.” Zhang Hongsen, a director of the State Administration of Press, Publications, Radio, Film and Television said.

While China’s WTO negotiations must satisfy all other members of the organization, U.S. negotiators could potentially be the toughest, and could also face the greatest resistance from China. In his plan for the first 100 days of his administration, Trump specifically calls out China, indicating “I will direct my Secretary of the Treasury to label China a currency manipulator.” This comes during a year when the Chinese yuan has performed poorly against the greenback, holding at its lowest average level since 2012.

China’s film quota is an easy target for Chinese regulators. The country’s officials are not shy when it comes to responding in kind to trade tactics by other nations, namely the U.S. In September, China lifted a 13-year ban on U.S. beef, imposed in 2003 due to an outbreak of mad cow disease, which has long since been controlled.

Various sources have indicated that China will be ready to negotiate the quota in February, 2017. The number specifically refers to cinematic theatrical  releases, as foreign films sold as video-on-demand and streaming are usually sold for a flat fee, although they must pass the same censorship process. Qualified co-productions between Chinese and foreign entities are not limited by the quota.

Trump’s administration may not be in a hurry to stand up for Hollywood. Despite his time as a television star on The Apprentice, Trump was criticized for his political stances by Hollywood figures including Robert DeNiro, Alec Baldwin and Tom Hanks, although others such as Stephen Baldwin, Jenna Jameson and Scott Baio backed the New York property developer.