Today, movies are a vital part of everyday life in China with over 24,000 screens across the People’s Republic playing a mixture of local productions and import titles to enthusiastic audiences. As with any territory that offers an abundance of media options, the big screen experience is just one way for viewers in China to see movies. Television, DVD, and particularly streaming websites provide a rapidly growing audience with the chance to view cinema from all over the world at their convenience.

In terms of traditional theatrical exhibition, China is now the world’s second largest movie market, and is expected to overtake the US in box office revenue and number of screens by 2017. It has been growing at an exponential rate with an average annual increase of 30% since 2003. With the China and US opening weekend grosses of such 2015 blockbusters as Furious 7, Minions and The Martian being roughly equal, it is evident that the international entertainment industry has entered into an exciting new era with Sino-US cooperation very much its economic lynchpin.

At the same time, the Sino-US market is still relatively new and in need of a stable ecosystem that will foster the cultural harmony and creative quality that is necessary if its full potential is to be realized.

A Brief History of Sino-US Film Market Cooperation
Film was first introduced to spectators in China on August 11, 1896 when a program brought by a Lumière representative was shown at the Hsu Gardens in Shanghai. A pioneer from the US would soon follow. James Ricalton from Maplewood, New Jersey came to Shanghai in July 1897 with a program of Edison Films, which consisted of such pleasures as bicycle racing, women dancing and men wrestling. Although the establishing of the Chinese film industry sought to emulate that of the classic Hollywood silent era, it had more initial cooperation with Europe than the US – the first Chinese film, Dingjun Mountain, which was made between 1905 and 1908, was shot with a French camera and utilized film stocks brought from a German photography supply store in Beijing.

However, in 1909, the US merchant Benjamin Polaski founded China’s first production company, The Asian Film Company. Initially based in Hong Kong and relocated to Shanghai in 1912, it provided the impetus for Chinese investors to establish film operations. In the early years, the Chinese companies relied heavily on US guidance for technical training. After the outbreak of World War I, the US replaced Europe as the major supplier of raw film stock for China’s movie production. This gave Hollywood a greater foothold in the market, leading to major US productions being shown in Shanghai, with Hollywood’s investment in distribution systems in China enabling its number of cinemas to grow steadily throughout the 1920s. Hollywood imports would become the entertainment choice of cinemagoers in the major cites, although audiences in less Westernized areas demonstrated a strong preference for Chinese films with local cultural characteristics, a pattern of regional taste that can still be seen today. US interests were forced out of China during the Japanese occupation, returning following Japan’s defeat during the Pacific War, only to be denied access once again after the PRC was founded on October 1, 1949.

Sino-US relations have developed slowly but surely since the international implementation of Deng Xiaoping’s “Reform & Opening up” policies in the late 1970s. In the 1980s, US productions such as Superman II (1980) and First Blood (1982) were show in China, albeit well after their domestic theatrical runs. In the early 1990s, China would buy an average of ten films per year from the US, mostly dealing with independent distributors rather than the major studios. Cooperation at blockbuster level started with the China release of The Fugitive (1994) with Hollywood studio Warner Bros. reaching a mutually beneficial agreement for their successful Harrison Ford vehicle to be shown on a revenue-sharing basis. It would be followed by True Lies (1994) and Titanic (1998) with the latter film proving to be the first big screen experience for a new generation of cinemagoers.

Hollywood has sought to cater more directly to Chinese audiences since the late-1990s when Columbia Pictures Film Production Asia was formed with this aim. This production arm yielded collaborations with such premier Chinese filmmakers as Zhang Yimou and Feng Xiaogang, although its greatest success was the global art-house phenomenon of Ang Lee’s martial arts period piece Crouching Tiger, Hidden Dragon (2000) which grossed a colossal $213 million worldwide, becoming the first (and to date, only) Chinese film to cross the $100 million mark at the US box office.

Around this time, talent from Greater China began to make waves in Hollywood as audiences in the West became increasingly receptive to East Asian culture. Jet Li parlayed a bad guy role in Lethal Weapon 4 (1998) into an international breakthrough with Romeo Must Die (2000), while Zhang Yiyi, Michelle Yeoh and Gong Li appeared in Memoirs of a Geisha (2005). After accommodating the European producers of the award-winning epic The Last Emperor (1986), China started to more readily open its doors to Hollywood projects that were seeking to capitalize on the visual appeal of the country with much of Mission: Impossible III (2006) being shot on location in Shanghai. Beijing is now a required promotional stop for above-the-title Hollywood names when rolling out their latest blockbusters – Johnny Depp, Chris Pratt, and Scarlett Johansson are just some of the major stars who have visited with their recent releases.

China’s quota system now welcomes 34 Hollywood films per year, with others released on a ‘buyout’ basis whereby local distributors purchase the China rights for certain titles. Roughly half of these titles are big-budget films in 3D or IMAX format, often in the genres of action, animation or science fiction, with comic book movies gaining traction in recent years as Chinese audiences become more familiar with the characters. Domestic underperformers like Escape Plan (2013), Pacific Rim (2013) and Terminator Genisys (2015) have actually proved more popular in the PRC than at home, with Chinese ticket buyers pushing such expensive investments into profitability.

While media outlets may regularly report record-setting China openings for US titles, there is much more to know about the current Sino-US market than the box office totals of the latest franchise entries.

The Current Activities of the Sino-US Film Market
Today, market cooperation between China and the US is not simply about making mutually beneficial arrangements for distribution. Instead, Hollywood studios and major American independent companies are establishing relationships with China’s film market to design blockbusters with cross-cultural appeal, while more Chinese enterprises are seeking to enter the Hollywood market through calculated acquisitions, or provide localized services to US studios that require a more direct connection to China’s valuable consumer class. A fierce competition has been prompted between mainland Internet behemoths Baidu, Alibaba and Tencent (often dubbed “BAT” by the Chinese press), and Dalian Wanda, which has unrivalled assets in the areas of property and leisure. Each is setting out to counter the widespread notion that China is an imitator rather than an innovator by not only producing original content, but finding new ways to market it to audiences that are constantly adopting new media channels.

The general term “Sino-US film cooperation” can now mean a myriad of things, depending on the players involved, the product that is being sold, or the service that is being provided. Indeed, the involvement of the aforementioned BAT companies alongside Wanda has led to a capital-intensive industry where local giants are also global partners. Tencent is the world’s largest distributor of online games and boasts nearly 800 million social media subscribers; Baidu is China’s most popular search engine; and Alibaba is now the world’s biggest e-commerce business. US companies seeking to have their films distributed in China must deal with these companies because each specializes in part of the release process.

Alibaba and Tencent control ticketing systems with the latter being an unprecedented social media force through its messaging service, WeChat. Alibaba, founded by Jack Ma, became the Chinese partner of Paramount Pictures by co-financing Paramount Pictures’ Mission: Impossible – Rogue Nation (2015), a smart move considering the immense popularity of star Tom Cruise in China and the excellent performance of previous franchise entry Mission: Impossible – Ghost Protocol (2011) in the territory. Aside from handling online ticket sales, Alibaba also released online games and helping Paramount partner with online vendors to sell related merchandise to fans. Alibaba is now moving into production and, not to be outdone, Tencent has a new production arm in Tencent Movie Plus.

Although the BAT companies are developing their own in-house productions, it’s their monopoly of the virtual landscape that makes them crucial players in Sino-US film cooperation. In recent years, Chinese producers have eschewed traditional film marketing practices in favor of online media with such releases as the Tiny Times series (2013-2015) and Dad, Where Are We Going? (2014) hitting peak awareness almost entirely through online targeting. Baidu has its streaming portal iQiyi, which is seeking to both distribute Hollywood content online and co-produce it. China’s online services have unfortunately become synonymous with movie piracy, but recent copyright measures have considerably cut-down such nefarious practices and made online distribution a viable option for both new and back catalogue Hollywood titles.

This is where US companies crucially need a China partner: although the major studios have mastered platforms like of Facebook and Twitter to mobilize particular audience segments, they are not as familiar with China’s new media landscape, which is arguably even more fragmented. Therefore, the assistance of a savvy partner and access to Big Data is necessary if they are to achieve sufficient penetration, whether promoting the latest blockbuster or a subscription to their vast archives of popular classics. Alibaba has a stake in the online video platform Youku Tudou, which participated in the marketing campaigns for Despicable Me (2010) and Captain America: The Winter Soldier (2014). This has fast becoming the best way to reach young consumers with disposable income who access information via mobile devices. Between them, these BAT companies hold immensely valuable data on the purchasing behavior of consumers who the Hollywood studios can only see as a mass audience rather than a set of specific segments with highly individual preferences when browsing for entertainment options.

US Films for Chinese Audiences
Realizing the popularity of US films in the Chinese market, the China-based media company DMG (now DMG Yinji) started producing US films that would have the right elements for success in China – exciting concepts, recognizable stars, slick visual effects, and, importantly, themes that have some resonance for local audiences. This strategy resulted in the sci-fi thrillers Looper (2012) and Transcendence (2014), and the action-adventure Point Break (2015). DMG was also involved in the comic book blockbuster Iron Man 3 (2013) although the decision to add scenes featuring Fan Bingbing for the mainland market was met with derision by audiences and critics alike. Instances such as this prove that Sino-US film cooperation needs to be more organic as shoehorning Chinese elements into what is obviously an American package only leads to a healthy skepticism from an audience that is increasingly aware of how films are assembled.

Three conditions have to be met in order for a film to be considered as a co-production: no less than one third of the investment must come from China; Chinese actor(s) need to take on significant role(s); and the film must include China as one of the filming locations. The Forbidden Kingdom (2008), a co-production between Huayi Brothers and Relatively Media, is a good example of such cooperation with its deft blend of East and West – it grossed $127 million worldwide by teaming Jet Li and Jackie Chan for the first time in a martial arts fantasy with worldwide appeal that was loosely based on the classic Chinese story Journey to West. Also starring Chan and similarly family-orientated, the remake of The Karate Kid (2010), which represented a partnership between China Film Group and Columbia Pictures, relocated the story from California to Beijing and took $359 million internationally. Co-productions are appealing to both sides: the are exempt from the import quota so Hollywood gets a better revenue-sharing scheme while China is a full creative partner rather than just a financier, with a strong say in the development and eventual presentation of the material.

If You Build It, They Will Come
Operating on a much bigger scale than a mere service provider or studio, Wanda is a producer of movies and also an exhibitor – it owns China’s largest cinema chain, and in May 2012, Wanda acquired the US cinema chain AMC Theatres for $2.6 billion to become the world’s largest multiplex operator. Wanda Media partnered with Universal Pictures and Village Roadshow Productions Asia on Man of Tai Chi (2013), a long-gestating martial arts project for director/star Keanu Reeves who was granted the opportunity to make his debut behind the camera based on his enduring popularity in the Chinese market. In 2014, new division WanDa Pictures partnered with US mini-major The Weinstein Company to produce the boxing drama Southpaw (2015) starring Jake Gyllenhaal. These were relatively mid-range productions, but in January 2016, Wanda acquired Legendary Entertainment for $3.5 billion. This acquisition of the company behind Man of Steel (2013) and Godzilla (2014) made Wanda Film Holdings the highest revenue-generating film company in the world.

By 2017, Wanda should be able to mount Hollywood-style blockbusters in China as it is set to open the Qingdao Oriental Movie Metropolis, which covers an area of 200 hectares in order to provide production facilities, exhibition and film-related tourism all at one location. Wanda undoubtedly has the resources to become an industrial giant at global level, but must cooperate with Hollywood in order to finesse its product to international standard if it wants to produce films that can breakout beyond China’s screens.

A Future of Cross-Cultural Spectacle and International Prestige
If Hollywood is looking to China as a means of protecting its economic bottom line, then China is looking to Hollywood to enhance its international image. Unlike the US market, which has shown signs of slowdown in recent years whenever a run of would-be blockbusters fail to hit as expected, attendance in China continues to increase, with audiences enjoying local titles from a wide variety of popular genres. In 2015, box office returns in China grew an incredible 48.7 percent, reaching a record $6.78 billion with local titles claiming a 62% market share. At a cost of $40 million, even a Chinese blockbuster such as Monster Hunt (2015) is a modest risk compared to its Hollywood equivalents, which are now budgeted in the $150-$250 million range, meaning that China’s film industry can sustain itself without the need for export.

Still, China’s industry craves international recognition as directors and producers want to be seen as being capable of producing ‘world class’ product. China Lion Film Distribution regularly releases Chinese movies in the US, such as My Lucky Star (2013), Breakup Buddies (2014) and Mr. Six (2015). These limited releases are popular with predominately Chinese audiences, but China’s industry is not content with small-scale success and there is a palpable need to recreate the triumphs of Crouching Tiger, Hidden Dragon and Hero (2002) which occurred more than a decade ago. There is also a desire to learn how to make films that will have a long-term shelf life and be fondly regarded decades down the line, which requires an understanding of how to balance local traditional elements with the technical panache of the Hollywood studios.

Although it may yearn for a worldwide smash and a rack of prestigious awards, China’s industry has been cautious about committing to extravagant US partnerships because it does not want to ‘lose face’ by investing in a project that underwhelms commercially or, perhaps more importantly, is reluctant to finance movies that do not evidence sufficient Chinese spirit. China does not want to be used as Hollywood’s bank and expects its unique culture and history to be represented with the sensibilities of the Chinese audience fully respected. The Chinese private equity firm Hony Capital has been content to invest in the product of the recently launched US film and television studio STX Entertainment, which is largely aimed at American audiences, but is something of an anomaly in this regard as most Chinese companies want to focus on projects with a Chinese archetype. With this aim, Le Vision has signed a six-picture development deal with Dark Horse Comics to adapt Chinese graphic novels into English books and features.

By insisting on culturally specific conditions when backing a co-production, Chinese companies stand a fair chance of being involved in a film that will play well in China and promote Chinese values when showing elsewhere. Following the enormous popularity of Kung Fu Panda (2008) and its 2011 sequel in China, Dreamworks Animation established a new Oriental Dreamworks division and partnered with China Media Capital and Shanghai Media Group for Kung Fu Panda 3 (2016). One third of the film was made in China and, although it has become standard practice for American productions to be shown in China in the English language with Chinese subtitles, a special Mandarin version was prepared with alternative animation designed to ensure that lip movements matched the dialogue. The extra effort was rewarded with a $58 million opening weekend in China, which outperformed the film’s US debut of $41 million.

The arrangement for the production of Kung Fu Panda 3 is significant because animation is one of a few popular genres that China has struggled to master and very much needs US guidance to brings its output in the field up to sufficient technical standard. This can be said of other logistically challenging genres, such as fantasy or science fiction, but the upcoming adventure The Great Wall (2016) looks to rectify this situation. A co-production between Legendary East and Chinese partners Le Vision Pictures and China Film Group, The Great Wall carries a $135 million budget and marks director Zhang Yimou’s first time shooting in the English language. Set during the Northern Song Dynasty, the film aims to be truly international with its large-scale approach to a Chinese subject, a visionary Chinese director supported by American blockbuster expertise, and the cross-culture star pairing of Matt Damon and Hong Kong icon Andy Lau.

The future of Sino-US film cooperation promises to be bright, with room for projects at a range of investment levels that share the aim of reaching diverse audiences around the world through projects with immense cross-cultural appeal.

This article was written by John Berra, Renmin University of China on February 2, 2016