The Wall Street Journal did a couple of stories last week on the difficulties foreigners face when getting involved in China’s concert business.

The first article, entitled, China Wants to Rock but Regulations Hinder, but Regulations Hinder, consists mostly of a Q & A session with Beijing entertainment lawyer Mathew Alderson.  Alderson focused on the obstacles foreign companies face in doing business in China’s entertainment industry:

Foreign direct investment in the entire entertainment industry is tightly restricted. The restrictions mean that foreigners cannot operate without a Chinese partner. So the first obstacle is the continuing restriction on international record companies that want to make and sell music in China.

Without record companies and music publishers it is harder to support a live industry drawing on touring international acts. But, then again, record piracy is rampant and the Chinese consumer is not fond of paying for downloaded copyright material anyway, so the traditional commercial foundation for record companies and music publishers does not exist. I suppose, then, that contempt for intellectual property comprises the second obstacle.

The third obstacle is the licensing system that applies to live performances. All live events must be licensed, but the system requires the advance submission of details that are often not known until the last moment, such as the details of all support acts and technical crew. Ticket sales cannot be advertised or marketed until the license has been granted.

Again, because of regulatory restrictions, foreigners simply cannot promote shows except via a license held by their Chinese partner. In many respects, the licensing system reflects censorship concerns. When some foreign entertainer gets up on stage and goes off about some topic they know to be off-limits, it only makes it harder for the promoter of the next act to get a license.

In the other WSJ article, Heavy Metal, Preapproved by China, Alderson talked of how performers in China must secure preapproval for every aspect of their show, down to the song lyrics, in an effort to prevent that which might be deemed politcally sensitive.

Despite all of the obstacles, however, foreign concert promoters are starting to make big money in China and optimism seems to be running rampant.  In other words, the business of putting on China concerts is not too dismilar to what foreign companies face in doing business in China as a whole.

The Hollywood Reporter recently did a story, entitled, “China’s Looming Entertainment Problem: Not Enough Lawyers,” discussing, among other things, intellectual property in China. Our own Beijing-based China entertainment lawyer, Mathew Alderson, was interviewed for that story and The Hollywood Reporter has kindly agreed to allow us to run a post based on the original interview.


Hollywood Reporter:  We’d like to first give a general overview of the state of entertainment and IP law in China.

Alderson:  There is no separate body of entertainment law as such, but it helps to understand how China generally views foreign investment. China limits the industries in which it accepts foreign investment or foreign business operations.  Foreign involvement in Chinese industries is categorized as “encouraged,” “permitted,” “restricted” or “prohibited”. Industries move between, or appear within, the various categories from time to time depending on the changing requirements of the Chinese authorities and the economy they oversee. An awareness of these categories not only assists foreigners to avoid illegal or unwise investments, it allows us also to understand the level of regulation to be expected in a particular industry as well as the business entity prescribed for that industry. Foreign involvement in the entertainment business in general, and the business of operating cinemas in particular, is “restricted” in China. It follows that there are substantial barriers to entry into the cinema business and the China film production business. These businesses are heavily regulated. Foreigners cannot operate in these areas independently of Chinese partners, so a co-production is required to make a film and a joint venture is required to set up a movie theatre.

As far as intellectual property is concerned, at first glance China’s legislative framework is world-class. This is largely because such a framework is a requirement of China’s WTO membership. The trouble is that this framework has been grafted onto a society with little frame of reference for its underlying concepts and the level of protection of intellectual property rights in China is often less than satisfactory despite the generally good quality of the laws themselves. I give some examples of current problems below.

In China, authority to adjudicate infringement and damages is vested in the courts and administrative agencies. So you have a situation in which the Chinese Patent Office, for instance, can make its own infringement determinations, award damages and issue injunctions without the need for a complaint filed in court.

One of the big issues at present is that foreign technology transfer is sometimes a pre-condition for market access. Trademark piracy remains a persistent and serious problem. Local businesses routinely register enterprise names that use famous US trademarks in misleading ways, often in conjunction with goods or services for which the US brand is famous. What we Westerners would see as Bad faith filings and trademark “squatting” are commonplace. And, as everyone is aware, DVD and online piracy are rampant. The Chinese government itself reckons that 15-20% of all products made in China are counterfeits accounting for around 8% of gross domestic product.


Hollywood Reporter:  Is this field developing fast enough to serve the booming Chinese film industry (expected to eclipse North America as the world’s largest film market in 5-10 years, as I’m sure you’re aware — the impressive growth numbers abound)?

Alderson:  I think it is developing steadily, but whether it serves any particular industry is another question.


Hollywood Reporter:  Is it reasonable to assume that more legal disputes will arise in the film and entertainment sector as the stakes rise and the value of the business grows?

Alderson:  Yes. That is a straightforward outcome of the sort of growth we are seeing. More business means more disputes in any market.


Hollywood Reporter:  This piece covering the “Lost in Thailand” suit quotes a consultant who suggests many studios are ill-equipped to handle IP protection issues (“Practitioners in the film industry have relatively weak awareness of intellectual property rights protection and very few companies would equip themselves with a complete team of lawyers in a film project or seek professional legal advice in advance.”) Do you agree with that assessment?

Alderson:  That may be the case with certain purely Chinese studios but I do not think it applies to everyone else.


Hollywood Reporter:  What kind of legal issues/problems/complaints do you think Hollywood parties are most likely to encounter/make in China?

Alderson:  It is generally assumed that China’s quota on foreign films is the biggest challenge but the quota has no application to domestic Chinese films or to official co-productions because these are regarded as domestic films. The biggest challenges are getting films approved by the Chinese censors and then getting paid a full share of box office. Foreign films must be cleared by the censors before they can be considered for the quota. Censorship comes first. China’s lack of any age rating system provides it with a useful and additional justification for censorship decisions. Censorship is a key issue because during the first 30 years or so of the PRC, foreign films were entirely banned and the film medium was seen mostly as a means of achieving “social enlightenment”. The government remains determined to subordinate the growth of the film industry to outcomes such as social stability and morality.


Hollywood Reporter:  What legal and other protections could and should a Hollywood studio seek when doing business in China?

Alderson:  There is a tendency to assume that US law and jurisdiction should apply to all contracts in all circumstances.  US law and jurisdiction are of little value unless the Chinese party has assets in the US. Just getting this jurisdiction piece right can be a critical form of protection.


Hollywood Reporter:   Are legal protections likely to be weaker for foreign parties than local counterparts in Chinese courts?

Alderson:   These days, foreign companies seeking to enforce contracts can often obtain good results in Chinese courts if the contract was written with the Chinese courts in mind and if the other party is a private company of a similar size. Having said that, it certainly is more difficult when you are suing a State Owned Enterprise (SOE) or a Government Agency.


Hollywood Reporter: Given that foreign (Hollywood) investment into China’s film industry, and partnership with local players, is continually increasing in scale, is it realistic to hope that new IP protection regulations might soon be passed and enforced in China?

Alderson:  Yes. Improvements are occurring all the time.  But at this point, the problem is not so much the laws and regulations, but rather, their enforcement.


Our Beijing-based attorney, Mathew Alderson, is Co-Chair of AmCham China’s Media & Entertainment Forum. Each year the Forum puts together a chapter on media and entertainment for the AmCham China White Paper. As part of the research for the 2013 White Paper, Mathew interviewed Nathaniel Davis, a director of Split Works and Splatter, which are Shanghai and Beijing based live music/festival promotion agencies & music strategy/creative consultancies. Part of the interview is reproduced here.

Alderson: What unique problems do foreign promoters face when promoting shows in China? In other words, what problems are particular to China as opposed to being prevalent in developed markets?

Davis: The main problem or barrier to foreign companies operating as show promoters in China is that neither foreign entities nor China-registered  WFOE companies can legally operate as sole entities and apply for performance permits (批文) from the China Ministry of Culture. This can only be done in partnership with Chinese domestic companies, either in terms of a formal joint venture or a temporary partnership.

Another serious problem is distortion of the market brought on by promoters (both foreign and local) who offer fees to international acts that are not in line with the realities of the market. In other words, many international acts are being paid premium fees for shows here when there is very little chance for the promoter to make that money back because they are hobbyist promoters with family or government money and have no real understanding or desire to help create and develop a sustainable environment for shows in China.

The other main problem is the entire 批文 system set up by the Chinese government which requires extra lead times for promoters to confirm shows before they can even begin to advertise, promote or market those shows and then even longer lead times until tickets may be sold, for those events of a size (e.g. arena, stadium, festival shows) requiring Public Security Burea (“PSB”) approval. This process can require anywhere from 20-40 days.

Alderson: How could the live entertainment sector in China be improved to encourage more participation by foreign promoters?

Davis: The answer would partly be the conclusion of the last White Paper chapter:

“streamline and clarify relevant procedures and regulations, not only for the benefit of live entertainment venues, producers, and artists, but also for the benefit of China’s cultural industry overall.”  That is a good place to start.

After that, I would suggest there also needs to be not just a streamlining and clarifying of regulations, but also a reduction in procedures and regulations. The legal process for having shows approved — particularly large shows — is nearly incapacitating. The lead time for these approvals can be crippling. It simply takes too long and it is often hamstrung by something as banal as  one of the government officials who needs to sign off on the approval being out of Beijing and needing to wait until he is back to physically sign the permit.  It is not easy to do shows here — that is why there are so few of us here doing it.

This is not just relevant to foreign promoters but to everyone working in the industry.

Alderson: What particular problems beset the advertising and promotion of live performances in China?

Davis: A lack of non “pay-to-play” media (i.e. media that are actually interested in stories, rather than what they get paid to promote.)

Lack of real media interest in anything other than mainstream music-celebrity driven stories.

Also the previously mentioned problems of not being able to legally promote or advertise a show until Ministry of Culture permits are received.

Alderson: What particular problems beset the selling of tickets to the public in China?

Davis: The problems are not dissimilar to those in the U.S. There is a robust scalped ticket market made up of a combination of fake tickets and tickets that have “leaked” from the venues, ticketing companies and government agencies that receive free tickets.

Otherwise, the main problem is still a relatively limited market for live music even in the major metropolitan areas of China, including Beijing and Shanghai. Ticket prices remain extremely high relative to the purchasing power of ordinary people.

I think there is also the lack of a completely secure, transparent and trustworthy ticketing service. We could definitely benefit from the development of a secure e-ticketing platform.

Alderson: How difficult is it to book large, high quality venues and what are the main difficulties in doing this?

There are only two real high-quality venues in the country, both of which were set up by AEG and one of which is still managed by AEG. The Beijing venue — the MasterCard Center — was originally built for the 2008 Beijing Olympics. The Shanghai venue — the Mercedes Benz Arena — was opened in 2010.  All of the other large venues are old and were originally indoor sports arenas and were not really built to do concerts or live entertainment events. The two aforementioned venues can be difficult to book simply because they are very busy.

However the difficulty lies not in the “booking,” but in the logistics of actually putting a show on at that level and in dealing with the vagaries of the system and specifically with the PSB.

Alderson: How good are local Chinese sound engineers, technicians and crew?

Davis: There are several good ones working out of Beijing, but they are few and far between. There are several foreign sound engineers here now who are in great demand. But overall there is a huge gap in the maturity of the live event industry here. There is top level gear here, but a limited number of qualified people to use the gear properly.

According to Mathew (who represents Nathaniel’s companies, along with a number of other companies involved with China entertainment), Nathaniel’s assessment is entirely consistent with the way that foreign involvement in live entertainment is classified by the Chinese authorities. As with other forms of entertainment, foreign involvement in China’s music industry is restricted. Live performances are considered particularly sensitive given the tendency of some foreign performers to publicly support causes or individuals that are “off limits.”

One of the things we are always writing about and always trying to get a handle on is what the attitude is in China towards foreign investment.  That attitude is never static for long, always shifting with the economy and sometimes shifting due to other factors such as politics.

We are in the midst of forming a WFOE right now for a couple of companies in somewhat difficult businesses.  Our advice was that they first form a Hong Kong entity as that likely would make WFOE formation go more smoothly. We told these clients that we have in the last six months or so been seeing Chinese governmental authorities increasingly throw minor roadblocks in the way of American and European companies seeking to form a WFOE in China.  One of these clients said that they had talked with someone who claimed not to have noticed any such tightening by China’s governmental authorities. All I could say was that we are seeing otherwise. I also talked of how China is even making getting visas tougher.

I thought about this today after reading a Variety Magazine article, “China: Market loosens quotas, but still cautious.” The article quotes Mathew Alderson(our lead China entertainment lawyer) on how China’s State Administration of Radio, Film and Television (SARFT) has stepped up its reviews of Sino-foriegn co-productions in an effort to make sure there is adequate China content to constitute a co-production.

A purely foreign film entitled to share in box office revenue must be imported into China as part of China’s annual quota. An official Sino-foreign co-production will be regarded as a domestic Chinese film, to which the quota does not apply. The distinction between foreign imports and Sino-foreign co-productions is also significant because they yield different box office shares. When films are imported on a revenue-share basis, the foreign distributor now gets 25% of box office takings under the new deal announced earlier this year. In a Sino-foreign co-production, around 38% of box office is available to the producers. The share available in a co-production is the same as it is for a purely domestic production.

The Variety article highlights the Chinese government’s increased vigilence:

The country’s State Administration of Radio, Film, and Television recently highlighted that its rules for co-prods require at least one third of production funding coming from China, along with one third of the main cast, while scenes must also be shot in China.

Co-prods help boost China’s image overseas while benefitting from learning expertise.

“Co-productions were definitely not intended as de facto quota busters, which is how they are often regarded in Hollywood,” says Alderson. “The authorities are now more vigilant about what they call ‘stick-on’ productions in which the Chinese elements are contrived and insubstantial.”

The Chinese are sensitive to the idea that Hollywood might be cynically taking advantage of its booming film market. Zhang Peiming, deputy head of SARFT, accused “Looper” and “Cloud Atlas,” accusing them of making superficial attempts at co-prod status.

“These co-productions get around the quota system and take domestic investment away and threaten Chinese movies,” Zhang said at the time.

For more on China co-productions and the China movie business, check out the following:

For more on the pros and cons of using a Hong Kong entity to form your China WFOE, check out How To Form A China Company (WFOE or JV). Hong Kong Entities. They’re Baaaaack.
Are you seeing what we are seeing in terms of China getting tougher on foreign business?


This post was co-written by Mathew Alderson (my law firm’s lead China entertainment lawyer) and Tyler Cohen.  Tyler is fluent in Chinese and he worked with Mathew on China film matters this past summer before beginning law school at the University of Toronto.

Three factors are driving international interest in Sino-foreign movie co-productions: (1) China has the world’s second largest box office, (2) official co-productions are outside China’s quota for foreign films, and (3) co-productions are entitled to a higher share of box office than quota films.

The problem is that box office is about the only source of distribution income in China and getting paid your fair share is difficult. It is difficult whether you are a domestic Chinese producer or whether you are a Hollywood producer. This difficulty is a reality that must be confronted in production investment agreements for all films that will have Chinese elements or will require Chinese production investment. It must also be confronted when accounting occurs under collection agent management agreements for Sino-foreign co-productions that do well, or appear to do well, in cinemas here. We have several clients having to deal with this latter issue at present and they are not very happy with the situation.

A dispute currently underway between a Chinese production company and China Film Group indicates just how difficult getting funds due from box office receipts can be. This case is significant for a number of reasons. Most importantly, it demonstrates that Chinese companies too are experiencing difficulties in getting “their” money out of China film co-productions. Moreover, the very fact that a Chinese court accepted a case against a China State Owned Entity (SOE) indicates that the authorities here regard the issue of box office revenue sharing as important and want it sorted out.

Let’s look at that case.

At the outset, we should make it clear that litigation against China Film Group would normally not be considered a great move if you want to work in this town again. We should also make clear that we are not taking anyone’s side on this case, nor are we involved in it in any way.  And again, this is a China company versus China company dispute.

United Film Investment is suing China Film Group for what United Film alleges to be multiple violations of contract, including what it calls “severe falsification” of box office receipts, for the co-produced film “My Own Swordsman.” Publicly available numbers put the total box office take at roughly 220 million RMB (USD$35 million), though some reports place the total closer to 300 million RMB (USD$47.5 million). United Film alleges it repeatedly requested financial statements from China Film Group, who remained “evasive.” United Film Chairman Mr Hao Yaning stated that it has received only 5 million RMB ($800,000) from China Film Group thus far under an agreement entitling them to 30% of box office totals. United Film is currently suing for 100 million RMB ($16,000 million) in unpaid box office totals, plus interest. Anonymous industry insiders cited by one source claim that the actual amount due to United is far less, but another source asserts that even under the least favorable calculations, United is due more than four times what they allege to have received.

United alleges that China Film Group reported only one month’s receipts out of 90 days total screenings and that the total “promotional fees” China Film Group claims to have paid are inflated and include inappropriate items. United also has suggested that China Film Group did not perform all of the promotional work required of it and that it may not have invested as much money as required.

In response to the suit and numerous public statements by Hao Yaning, China Film Group lawyers released the following statement:

Before the courts have determined the relevant facts and passed judgment, United Film Investment has repeatedly publicized remarks on CFGC not giving the sufficient percentage to United Film as well as other [arguments] inconsistent with the facts. This has led to a serious misleading of the public, and has severely harmed the legal(/legitimate) rights and  interests of CFGC. CFGC [thus] retains the right to investigate legal liability on the part of United Film for severe infringement of CFGC’s reputation.

This warning may also be seen as applying to foreign studios. And given the central role China Film Group plays in distributing foreign films in China, it reinforces the idea that public airing of grievances may have unwanted effects.

Perhaps further complicating the situation is that China Film Group is in the process of doing an IPO for a subsidiary company. Industry insiders note that the current dispute may impact the IPO, especially if the court rules for United Film.

Foreign film companies involved in China co-productions are watching this case with interest and we will report back when warranted. No matter what, this case highlights the difficulties in getting money out of China’s box office.

For more on China co-productions and the China movie business, check out the following:

AmCham’s Public Policy and Development Committee is putting on a panel discussion on market access for service providers.  This will take place on Monday August 20 from 9:30-11:00.  The plan is for the panelists to “briefly present the major market access issues in their sector, followed by a discussion among the panel and audience. After the panel we will open the floor to all participants to raise market access issues specific to their sector.”

The following will be the panelists:

Mathew Alderson, Harris & Moure’s Beijing-based partner, represents companies and individuals operating internationally in media, entertainment and IP-intensive industries. His clients range from major architectural firms, publishers, fashion designers and cosmetics brands to international event management companies, producers, directors and writers. The majority of Mathew’s clients are based in China, the United States and Australia.

Brett Norwood is a tax partner and PhD economist with Deloitte’s global transfer pricing tax practice. He was the first transfer pricing tax partner and group leader for Deloitte in Northern China, and has helped lead the growth of the practice and the development of a group of approximately 30 transfer pricing specialists in Beijing. Brett is currently leading the documentation efforts for groups with dozens of entities across China, is advising multiple taxpayers regarding their transfer-pricing audits in China, and is also advising multiple China-based companies which are expanding their operations overseas.

Lester Ross is a partner in WilmerHale’s Transactional and Regulatory Departments. His practice concentrates on mergers and acquisitions, foreign investment, financial services, project finance, energy and environmental law matters and capital markets. Mr. Ross has represented foreign companies in agricultural, automotive, chemicals, energy, environmental, financial, high-tech, pharmaceuticals, publishing and service industries in their strategic expansion in China.

Matthew Cuerdon joined Bó Lè Associates in Beijing as a Managing Director, having accumulated over 19 years of experience in the Asia Pacific Region. Bó Lè Associates is one of the largest executive search firms in Asia, the largest in China with a well-developed network of 25 wholly owned local offices worldwide, and 520+ staff including 470+ experienced consultants and researchers, and 50+ support staff including Finance and Accounting, IT, in-house Recruitment and Training, and Marketing and Communication specialists.Ba

Back in the day when China was more pretty much exclusively thought of as the factory to the world, we were constantly touting the China opportunities for foreign service companies. Those opportunities have become pretty obvious these days, but at the same time, there is a “feeling” out there that China is getting tougher for foreign businesses, especially those in the service sector.  This forum should be an excellent way to learn about the market access issues facing foreign service businesses in China.


Our lead China entertainment lawyer (and regular CLB contributor), Mathew Alderson, was just named by Variety Magazine as one of 50 “Game-Changing Attorneys” who “rock the [entertainment law] biz.”  And, hey, we couldn’t be prouder.  The list consists of those “attorneys whose recent deals and court battles have changed the shape of entertainment.” Mathew and Yu Rong, from the Hylands Law Firm, are the only China-based attorneys to have made the list.

Variety had this to say about Mathew:

Mathew Alderson
Harris & Moure, Beijing
University of Queensland, Australia, 1989
Over the past 18 months Alderson has advised on various ventures between Chinese and foreign partners, including feature co-productions, theatrical joint ventures and post-production alliances. The latter have included a number of 3D initiatives — a hot area in China. This work has put him at the point of convergence between China’s production, post and exhibition businesses. “Here in China there are no ancillaries, there’s very little legitimate income stream other than box office, so people are very focused on box office,” Alderson says. “The only way to fully access box office is to co-produce, because co-productions are entitled to a higher box office share than foreign imports.”

We like it.

If you are interested in China movie law, check out the following posts Mathew has written for us:




In my previous post, Aussiewood Film Finance And China Co-Productions. Ever The Twain Shall Meet?  I explained how a cash rebate equivalent to 40% of feature film production costs is available from the Australian government for films with “significant Australian content” if the producer incurred “qualifying Australian production expenditure” when making the film. This rebate is known as the “Australian producer offset.” In this post, I explain how “official” co-productions between Australia and China, and between Australia and certain other nations, are exempt from some of these requirements, making it easier to access this offset.

But first, what is an “official” co-production? For purposes of the Australian producer offset, an official co-production is one made under formal arrangements between Australia and the governments of various countries. These formal arrangements are treaties or memoranda of understanding. Australia has a co-production treaty with China and also with other countries, including Singapore, Canada and Germany.  Note that Hong Kong is not considered part of China for treaty purposes, so a China-Hong Kong-Australia co-production does not qualify as an “official” co-production.

For purposes of the Australian producer offset, the main advantage of an official Chinese co-production is that it does not need to have “significant Australian content.”  To qualify for the offset, it is only necessary for the producer to have incurred “qualifying Australian production expenditure” when producing the film. Another advantage is that it is not necessary for the Australian production company to be the only production company. Still, the film needs to comply with Screen Australia’s “International Co-Production Program Guidelines.” The guidelines are subject to modification under various formal arrangements, but here are some of the basic elements:

  • The film may be based on an underlying work (such as a novel) from any country.
  • The screenplay for the film must be attributed to a writer who is a national or permanent resident of one of the co-production countries, but a non-credited writer can come from a country without a formal arrangement with Australia.
  • Generally, cast and crew must still come from an “official” co-production country, though one or a small number may come from other countries, particularly when required by the script or by financiers. Generally, credited roles which are not creative or technical roles and are not part of the making of the film, such as executive producers and assistants, need not be from the co-producing countries.
  • The film must be made in an “official’ co-production country, though there are exceptions when filming is required on location in other countries.
  • The proportion of the production budget raised by the Australian co-producer must be reasonably similar to the proportion of the budget spent on the Australian elements.
  • The Australian producer’s financial contribution must be reasonably proportional to the Australian creative contribution and the Australian producer’s financial contribution must be reasonably proportional to the spend on Australian elements.

The bottom line is that the Australian producer offset is an attractive investment incentive for co-productions between China and Australia and between Australia and the other nations with which Australia has made formal co-production arrangements.

China now has the second biggest box office market in the world and the third biggest film production industry in the world.

As you would expect, here in China we are seeing an upsurge in foreign interest in the domestic business of movie theaters or cinemas. This interest is driven by the sheer rate of growth in screen numbers, combined with the lingering expectation that the market is about to “open up.”  Increasing interest in cinemas complements and encourages the corresponding jump in interest in Sino-foreign film co-productions.

But until such time, if any, as the entertainment industry in China truly does open up, we need a sober assessment of the regulatory environment. This post is part of a series aiming to assist with such an assessment.

Let’s start with how China looks at foreign investment in general.

The industries in which China will accept foreign investment or foreign business operations are limited.  Foreign involvement in Chinese industries is categorized as “encouraged,” “permitted,” “restricted” or “prohibited.”  Industries move between, or appear within, the various categories from time to time, depending on the changing requirements of the Chinese authorities and the economy they oversee.

Before making an investment or commencing operations in China, it is essential that foreigners understand where the relevant industry sits in the categorization scheme. This simple reality is often overlooked in the headlong rush to get into the Chinese market or to reach the Chinese consumer. An awareness of it not only assists foreigners to avoid illegal or unwise investments, but it also allows for an understanding of the level of regulation to be expected in a particular industry, as well as the business entity prescribed for that industry. In restricted industries, for instance, foreign involvement can only occur through a Sino-foreign joint venture.

Foreign involvement in the entertainment business in general, and the business of operating cinemas in particular, is “restricted” in China. It follows that there are substantial barriers to entry into the cinema business, that the business is heavily regulated, and that a joint venture is required in almost all cases. For more on China Joint Ventures, check out “How To Survive A China Joint Venture” and the posts cited within it.

The regulatory framework for foreign investment in cinemas is created by a series of Interim, Provisional and Supplementary Provisions promulgated by SARFT in 2000, 2004 and 2005, respectively. The salient features of the regulatory framework may be summarized as follows:

  • With the exception of investors from Hong Kong and Macau, non-Mainland Chinese are not permitted to wholly own cinemas or cinema chains
  • With the exception of investors from Hong Kong and Macau, non-Mainland Chinese must hold their investments through a Sino-foreign joint venture
  • A cinema joint venture requires registered capital of not less than CNY 6 million ($950,000)
  • The Chinese joint venture partner must generally have at least 51% of the decision-making power
  • In Beijing, Shanghai, Guangzhou, Chengdu, Xi‘an, Wuhan and Nanjing, foreign investment in the joint venture may be as high as 75%. In all other places foreign investment in the joint venture must not be more than 49%
  • No cinema joint venture can run for more than 30 years
  • The joint venture requires a Film Screening Business Permit

In future posts I will look at the application of this regulatory framework in more detail and consider other aspects of the cinema business in China.


Our Beijing-based lawyer, Mathew Alderson, is always reading and referring to deep think books on China. The other day when he told me about Martin Jacques’ When China Rules the World, I suggested he do a review. This is not a new book (it came out at the end of 2009), but because it takes positions so diametrically opposed to what so many others are saying, I thought it was still worthy of a post and so I requested Mathew do one. The following is Mathew’s review of When China Rules the World: The End of the Western World and the Birth of a New Global Order:

For the past two hundred years or so we have lived in a Western-made world, a world in which the very notion of being modern has been synonymous with being Western. In this insightful and entertaining book, Martin Jacques argues that the twenty-first century will be different. As increasingly powerful non-Western countries rise, Western nation-states will no longer be dominant and modernity will take an Asian form.

In the new era of “contested modernity,” China will be the central player. As the title of the book suggests, it not a question of if China will become ascendant but merely a question of when. Leaving the timing aside, China will not become a Western-style society but will remain highly distinctive. Modernity, Jacques reminds us, is made possible by industrialization, a process which remained exclusive to a small part of the world until about the middle of the twentieth century. With the exception of Japan, the West has enjoyed a monopoly on industrialization and the modernity that engenders. China’s arrival as a major power therefore marks the end of Western “universalism.” Western norms, values and institutions will increasingly find themselves competing with those of China. There will be an era of competing modernities in which no hemisphere will have the unique prestige or legitimacy that the West has enjoyed for the past two hundred years.

Jacques notes that the mainstream attitude has been that the world will not change fundamentally with China’s rise. He regards this attitude as based on three misconceived assumptions. The assumptions are, first, that China’s challenge to the West will be primarily economic and, second, that China will become a typical Western nation. The third assumption is that the international system will remain basically as it is now, with China becoming a compliant member of the international community. These assumptions are misconceived because they ignore that China is the product of a history and culture with little or nothing in common with that of the West. China is simply something quite different.

Jacques identifies a number of key differences between China and other countries which, he says, will make a Chinese modernity very different from the current Western form of modernity.

One key difference is that China is not a nation-state but should be understood as a “civilization-state.” Its identity was formed well before China assumed the status of a nation-state. What defines the Chinese, therefore, is not their sense of nationhood but their sense of civilization, a civilization frequently claimed to have existed continuously for the past 5,000 years. Another difference, says Jacques, is that China is increasingly likely to revert to an ancient conception of its East Asian neighbors as tributary-states rather than as nation-states. Until little more than a century ago, China was organized in relation to these other peoples. Yet another difference is that there is a distinctively Chinese attitude to race and ethnicity. Unlike the world’s other most populous nations, the Chinese do not acknowledge or seek a multiracial character. The Han Chinese, comprising a majority of some 92%, believe themselves to comprise a distinct race whose superiority, when a long view is taken, they regard as self-evident. In this view, Western ascendancy is a recent and brief anomaly, following which China will return to its natural position at the centre of the world.  It is this later point which gives rise to one of Jacques’ most compelling concepts: the “middle kingdom mentality.”

Until its engagement with Europe in the nineteenth century forced it to operate more according to the rules of nation-states, China thought of itself as the centre of the world — it was the middle kingdom or the “land under heaven.”  It did not even need a name. Unlike, say, the United States or Israel, it was not said to be the land chosen by a God, but rather the chosen land by virtue of the sheer brilliance of its civilization. China, therefore, has a long-standing and utterly Sinocentric view of its place in the world. Surrounded by barbarians, it conceives of itself as a universe in its own right. Unlike those of a nation-state, China’s frontiers were, until relatively recently, never carefully drawn or policed, but instead regarded as zones tapering from civilization into barbarism. China’s expansion into these frontiers was land-based, unlike the expansion of the European powers, which was maritime-based. With land-based expansion, China always enjoyed the advantage of proximity. China was therefore able to undertake a process of cultural and racial expansion over millennia. This is in stark contrast to the expansion of the European powers, most of whose colonies never became permanent because of the difficulty of assimilating alien cultures and races from a distance.

In stark contrast to this Sinocentric mentality, Jacques argues that the dominant Western view of globalization is that it is a process by which the rest of the world becomes and should become increasingly Westernized, with free markets, the rule of law and democratic norms. But, as Jacques points out, China does not conform to the present conventions of the developed world and the global polity. Its underlying nature and identity will increasingly assert themselves. When it becomes, as Jacques presumes it must, a great power, it will not behave like the West. The greatest concern about China as a great power, he says, is its deep-rooted superiority complex and the hierarchical mentality this has engendered, both of which derive from the middle-kingdom mentality.

Though at times Jacques seems almost to exalt in an ascendant China, he is methodical in laying down the historical, economic and geopolitical foundations for the positions he takes and he is at pains to acknowledge the many competing views. On the whole, this lends the book a balance, making it of value even to a reader who might not agree with its conclusions. Though I myself did not agree with all of Jaques’ conclusions, I still heartily recommend When China Rules the World to anyone interested in China and its future role in the world.