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Is China Taking Over Hollywood?

With 70 percent of profits coming from abroad, how much are execs willing to give up in exchange for larger audiences?

A movie theater in Beijing, China.
FREDERIC J. BROWN/AFP/Getty Images
October 1, 2013 12:30 PM ET

All that kowtowing, and what's there to show for it?

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For years, Hollywood has been bowing and scraping to please the Chinese government, which allows the importation of only a handful of non-Chinese films into its theaters each year. The hardball negotiators of Hollywood were willing to roll over, in terms of finance and even content, in return for access to the world's largest overseas moviegoing audience – and soon, the world's largest moviegoing audience, period. And after all that, the studios still aren't seeing a dime from recent exports like Skyfall, Life of Pi and A Good Day to Die Hard.

The reason, revealed this summer in reports by Variety and The Hollywood Reporter, is a dispute over a 2 percent value-added tax that China imposed on movie profits last year. American studios with pre-existing deals in China balked over having this tax come out of their 25-percent share of the profits, so China hasn't paid those studios in months, withholding tens of millions of dollars. Sure, Hollywood could retaliate by pulling its movies from the country, but at a time when 70 percent of a Hollywood theatrical release's profits come from abroad, Hollywood needs China a lot more than China needs Hollywood. So expect the dispute to be resolved soon, and probably on terms more favorable to China than to Hollywood.

The dust-up is only the latest between Hollywood and China in recent months. In July, China abruptly pulled Despicable Me 2 from its release schedule, citing no reason. A few months ago, Quentin Tarantino agreed to trim some of the gore out of Django Unchained, but Chinese censors yanked the movie at the last minute anyway, until Tarantino agreed to more cuts.

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In fact, it's routine for Hollywood to alter the content of its overseas prints to placate China. Sometimes, it's a question of outright censorship. For instance, all of Chow Yun-Fat's scenes in Pirates of the Caribbean: At World's End were cut because Chinese censors considered his pirate character an offensive ethnic caricature. Chinese censors also found offensive all the Chinese-American characters who were secretly alien invaders in Men in Black 3, so they ended up on the cutting-room floor. The funniest example is the recent Titanic 3D, which cropped out Kate Winslet's famous nude scene out of fear that the 3D effects might inspire moviegoers to reach out and try to cop a feel.

Sometimes it's adding scenes, as in Iron Man 3, whose Chinese prints include spliced-in scenes of popular Chinese actor Wang Xueqi as a doctor who helps Robert Downey Jr.'s Tony Stark. He's also shown drinking the Yili brand of milk, in a blatant scene of product placement. The scenes were so superfluous that even Chinese audiences practically hooted them off the screen.

And then there are movies that undergo more fundamental content changes for releases in all countries in order to please China. Wonder why the Mandarin in Iron Man 3 wasn't Mandarin at all? Or why the martial art practiced in the recent Karate Kid remake wasn't karate at all but kung fu, with the movie set not in America but in Beijing? Or why the villainous invaders in Olympus Has Fallen or the recent remake of Red Dawn were North Koreans instead of the more plausible Chinese? The studios behind those films wanted to make sure they made the cut and were among the just 34 foreign movies permitted for import into China each year.

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American producers can fudge that quota by partnering with Chinese production companies. In exchange for taking on Chinese producers, investors, and story elements, an American studio can claim 43 percent of the profits from Chinese ticket sales, instead of just 25 percent.

Even so, the seemingly capricious decisions of the Chinese government have made some Hollywood insiders wonder whether cooperating with China is worth it. (Or, as the Reporter put it, "The China Clusterf—k: Is Hollywood Fed Up?") After all, RZA's martial arts movie The Man With The Iron Fists gave China script approval and even casting approval (producers did not cast a Chinese actor who was out of favor with the government), in return for being allowed to film in China, and even after all that, China still wouldn't import the movie for its theaters.

In the case of Django, Tarantino had agreed to some mild edits to tone down the violence, but on the day the film was to open in China – even as projectors had started running – the government suddenly banned the film. No reason was given, but after Tarantino cut out the film's male nudity, snipped a violent flashback sequence and toned down the ending, the film finally played for Chinese audiences. It didn't do very well, perhaps because it was playing on fewer screens than it had been booked to play before and was now programmed opposite Iron Man 3 and The Croods. Or perhaps because, during the month-long delay, Chinese viewers who were interested in the film managed to see it in pirated versions.

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There's also the issue of whether Hollywood's willingness to let China dictate content plays into the propaganda goals of a regime that's often accused of human rights violations. It's one thing to cut offensive racial stereotypes, but what about movies that show a one-sided picture of China (lots of skyscrapers, no political prisoners or sweatshops) or go out of their way not to present Chinese characters in an unflattering light? Hollywood may be full of people who wear ribbons to support the Dalai Lama, but no studio is going to make another Seven Years in Tibet or Kundun any time soon, lest they be frozen out of the market the way the studios behind those films were in the late 1990s.

Still, Hollywood keeps coming up with new ways to get on China's good side. The fourth Transformers, which is being produced by not one but two Chinese companies, will include a number of roles for Chinese performers, who are being selected via a reality show airing in China, on which four of the judges are Hollywood insiders.

And you can expect Hollywood's creative types to continue to stretch to find ways to flatter China on screen. As Avengers filmmaker Joss Whedon told Entertainment Weekly in April, regarding the upcoming sequel, "I'm working on the script right now, and if someone came to me and said, 'We're looking into doing a chunk of this in China' – well, I'd have to think about it. China is on my radar. It can't not be at this point."

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