Among the latest events of cross-border trade conflict, China will effectively import less films produced by the American film industry.

The China Film Administration, which is the governmental body charged with managing film produced and distributed in China, announced it would begin reducing the amount of American film content imported into the country. While not a ban, American film distributors should anticipate what this means for their business and brace for the financial impact this could have on the entertainment industry.  

GLOBAL TRADE CONFLICT: IMPACT ON FILM

This reduction in imported film is likely the country’s response to the Trump administration raising tariffs on American imports of Chinese goods to 145%. However, in a country where preserving domestic culture and local interests is a priority, China has historically imposed a strict foreign film quota system. 

This recent announcement is a significant divergence from what appeared to be a gradual opening and more accepting entertainment market. American films first entered the Chinese market in the late 1990s with a quota of 10 films per year – which, over time, continued to increase. In 2024, 42 American films were approved for release in China. This was a result of a more cooperative relationship between the countries over years of negotiations (covered in more detail here).

FINANCIAL STRAINS ON THE ENTERTAINMENT INDUSTRY

China has been a challenging market for American films, as the U.S. entertainment industry saw lower return on investment under a fixed 25% cap on revenues shared with U.S. film distributors. These recent developments are likely to pose even great challenges for U.S. distributors. 

With less American films being able to enter the Chinese markets, American film distributors will have to make difficult decisions about which films can reach China’s 90,000+ cinema screens and hundreds of millions of moviegoers. 

BOX OFFICE OUTLOOK

Consequences of this policy could also include hits to movies’ worldwide box office, thus impacting the financial gains of American film distributors, their partners and talent. Box office serves as the most publicly available gauge on film performance and is considered during film production to determine license fees. For instance, further into the promotion of a film, additional revenue sources – like television, non-transactional video on demand and non-theatrical – may be based on box office performance. 

Bonuses based on box office performance are also a well-established tool to reward talent and financiers for successful productions. This announcement may make the thresholds for bonuses harder to reach without the ability to engage the Chinese film market. 

WHAT IS NEXT FOR FILM?

Considering American films accounted for less than 10% of all Chinese box office receipts in 2024, even if the new policy subsides, there are restrictions on American films that make it challenging to reach this audience. Many American film distributors have already begun relying less on this market and instead have placed emphasis elsewhere. Should restrictions on American film only increase, production budgets and distribution plans may need altered. 

This issue is evolving and unpredictable – therefore, American film distributors should prepare their businesses today with sound financial planning and long-term, strategic growth goals. As you face these challenges, GHJ’s entertainment industry experts are here to support you, with services like ultimate analysis and contract negotiations, among others. If you have questions, contact GHJ’s Entertainment Services team for support.