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Fionnuala Halligan

'I BELIEVE in China,' Golden Harvest's Raymond Chow said in Seoul this week. 'I believe the market is opening up and I know they are trying hard.'   From the company's Hong Kong headquarters, Mr Chow has positioned himself as the gatekeeper to mainland movie audiences.

  So far he has signed deals to distribute films for Paramount, Universal, MGM-UA and Hollywood's newest studio, DreamWorks SKG.

  In Seoul, there were smiles all around as DreamWorks chiefs Steven Spielberg and Jeffrey Katzenberg signed a deal with the Cheil Group, their largest investor.

  The Cheil group will inject US$300 million into DreamWorks over a five-year period. The funds are intended to help the upstart movie company distribute its films in Asia under a contract with Golden Harvest.

  But DreamWorks is not the only US film company courting Golden Harvest.

  The entire US film industry is dancing around China like a moth to a flame.

  It is not just because China has the world's largest potential audience.

  It is because Chinese audiences like to go to the movies more often than do people in many other countries.

  Last year Chinese bought 4.7 billion movie tickets and data from 1992 suggests that the average Chinese went to the cinema 9.19 times that year.

  That compares with mature markets such as the US, where the average person goes to the movies 4.96 times a year, or Britain, where attendance is 2.18 times a year.

  China has 3,100 crumbling urban cinemas and 180,000 town halls and mobile projection units.

  Yet the industry, which took in two billion yuan (about HK$1.86 billion) last year, is in a state of disarray.

  Ticket prices can be as low as 30 fen or as high as US$2.

  If 4.7 billion admissions last year sounds impressive, consider that in 1992, 14 billion tickets were sold.

  China's film industry, with 16 major studios, makes 150 movies per year.

  Once one of the the world's most protected markets, China last year opened the door a crack for overseas studios.

  Eight major international movies were shown throughout the country on a revenue-sharing basis with China Film Import and Export Corporation, the monopoly distributor and sole licensor of foreign films in China.

  Previously, overseas films were shown on a flat-fee basis.

  Films such as True Lies and Jackie Chan's Rumble in the Bronx have grossed US$11million to $15 million in box-office receipts.

  Forrest Gump took only US$2 million in a limited release. That is good, but US studios are certainly not getting rich from the proceeds.

  US film companies take home an estimated 34 to 38 per cent of gross revenues, out of which they must pay the high taxes and printing and advertising costs. Ultimately, they may walk away with only 10 to 15 per cent of the gross.

  Eight films hardly spell a flood, although contracts have been signed with China Film for four more.

  At the same time, however, new rules on foreign investment have barred direct cash-flow to the film industry for distribution or production, or for the construction of the new cinemas that China so badly needs.

  Golden Harvest has plans for as many as 500 screens in China, its chairman, Mr Chow, said. US chains such as United Artists and AMC have had to halt construction of their theatres pending a change to the ruling, which may come any day.

  Theatre construction will undoubtedly kick-start the industry and help the US studios keep firmer track of their films amid the country's serious piracy problems.

  The main focus of policy changes has been on market access and the means of distribution.

  Vice-Minister of Film, Television and Culture Tian Conming has denied there exists a quota for overseas movies (the Sino-US market access agreement bans quotas).

  But at the US-China Film Industry Conference earlier this month, Mr Tian announced what may result in massive changes in the ways overseas films are distributed in China.

  He said China Film would lose its distribution monopoly, but not its licensing monopoly.

   He said that all the studios, some independents and even the cinemas themselves could become distributors.

  Already Golden Harvest and Tianshan Film Studios are to test the market by releasing Tsui Hark's Blade.

  Mr Chow said: 'If you are a producer, I don't advise you to do this, because it involves finding individual distributors and sub-distributors yourself. China Film still pretty much controls all sub-distributors and they still have the best connections.

  'Golden Harvest is doing it because we want to test the market, and we know this is the first, important step in really opening the China market.'   The key to this is the ability of overseas producers to negotiate with other companies for higher profit margins than those offered by China Film. 'It will be a form of competition for China Film,' Mr Chow said.

  China Film has launched a new drive to attract foreign cash to its co-productions and the studio is being 'rewarded' with a distribution licence.

  In the meantime, studios in Beijing and Shanghai, which have been touting for films from major US studios, have 'insisted they need a True Lies because, if their first movie doesn't perform, it all comes to an end,' one US executive said.

  Veterans of the China movie market are more sceptical. 'Nobody's making any real money out of the market now,' one executive said. 'They're all just there because they're praying it becomes good. Yet from these new directives, I don't see any real signs of the market opening up or anybody taking out any more cash. The situation, if anything, has become even more confusing.'   Mr Chow said: 'China is potentially the biggest film market in the world. We estimate that the sheer numbers there are bigger than the rest of Asia combined. At the moment our share of revenue is no worse than in any other country.

  'It's not fair to say we are only getting 15 to 20 per cent out of China because if you look at any other country, we're not getting much more. So I don't think the market is unreasonable; things can always improve.' 



US film world woos movie-mad China