China stock market

Studio stocks plunge as tax man’s scrutiny of Fan Bingbing’s fees may uncover actors’ dirty secret

PUBLISHED : Monday, 04 June, 2018, 12:31pm
UPDATED : Wednesday, 03 October, 2018, 12:39pm

Shares of China’s film studios and movie producers plunged on Monday amid concerns that an investigation into allegations of tax evasion by a top actress could shed light on a long-held practice in the industry and disrupt operations.

Huayi Brothers Media, one of China’s largest studios, plunged by the 10 per cent daily limit to a five-year low of 7.36 yuan on the Shenzhen exchange. Wuhan DDMS Culture, which produces television drama and movies, plunged by 9.8 per cent to 15.27 yuan on the Shanghai exchange, the lowest close since March 29.

At the centre of the storm is Fan Bingbing, the highest-paid celebrity in the Forbes China Celebrity 100 list for four consecutive years, with US$17 million of earnings in 2016. The actress, who played the character Blink in the 2014 X-Men: Days of Future Past, gained attention last week after paying more than 200 million yuan (US$31 million) for a duplex penthouse flat in Shanghai.

China’s X-Men actress Fan Bingbing denies evading taxes

A Chinese television presenter blew the whistle on Fan’s real estate purchase, calling into question the true size of her earnings. Fan allegedly signed two contracts for her films to avoid paying higher tax on her income, the presenter Cui Yongyuan said in a blog.

Fan’s studio denied she had ever signed duplicate contracts to hide her earnings. Still, the tax bureau ordered the Jiangsu provincial office, in which Fan’s studio is based, to begin investigations.

The market is very concerned about the excesses in the industry. Tax evasion and money laundering do exist in the entertainment circle
Wu Kan, Shanshan Finance

Shares of Zhejiang Talent Television & Film, in which Fan owns a 1.6 per cent stake as the 10th largest shareholder, plunged 10 per cent to 14.85 yuan in Shenzhen, the lowest since March 2015. The slump spilled over to Zhejiang Huace Film & TV, which closed 2.8 per cent lower at 9.92 yuan after earlier retreating by as much as 7.2 per cent in Shenzhen.

“The market is very concerned about the excesses in the industry,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “Tax evasion and money laundering do exist in the entertainment circle. These issues are now put on the table.”

Fan has not been found guilty of any wrongdoing. Still, such allegations are weighing down on China’s film production studios, as they prepare to unseat Hollywood blockbusters as the kings of the country’s growing box office.

China established a global monthly box office record in February, coinciding with the Lunar New Year holiday, when ticket receipts topped 10 billion yuan for the first time. Leading the charge was Operation Red Sea, a Chinese military “shoot ’em up” to commemorate the 90th anniversary of the founding of the People’s Liberation Army, directed by Hong Kong director Dante Lam.

Chinese February box office sets new monthly world record US$1.57 billion

Fan, 36, rose to fame during the late 1990s with the Mandarin court drama My Fair Princess. She has been increasingly venturing into Hollywood movies and is a regular at red carpet events like the Cannes Film Festival. She is the first Asian celebrity ambassador for the Champagne house Moet & Chandon, and also the celebrity endorser for Chopard.

I Am Not Madame Bovary, the Huayi Brothers movie of 2016 whose cast was led by Fan, grossed 483.2 million yuan at the Chinese box office, one of the year’s biggest releases.

Alibaba Pictures Group, an affiliate of this newspaper’s owner and an investor in Mission: Impossible - Rogue Nation, fell as much as 5.8 per cent to HK$0.97 in Hong Kong.