This post was written by Mathew Alderson, a Beijing-based Australian attorney who joined us earlier this year after having worked with us on a number of matters involving the creative services industry. Since Mathew has considerable experience representing foreign companies involved in China’s film industry, I asked him to write this post setting out the basic rules for foreign companies doing film co-productions in China.

Foreigners engaging in film production in China need to comply with a set of rules administered by the State Administration of Radio Film & Television (SARFT) and China Film Co-Production Corporation (CFCC). CFCC is a subsidiary of China Film Group Company.  I have overall found both SARFT and CFCC quite accommodating to foreign film productions in China.

Though at first glance the rules for Sino-foreign film co-productions in China seem fairly clear, a closer review gives rise to a number of issues. Some of these issues and questions will be discussed in subsequent postings. The following summary of the rules is intended to provide a frame of reference for such a discussion while at the same time setting out the basics

1. No film can be co-produced in China without a co-production license. The license is granted by SARFT but processed by CFCC. Anyone engaging in film production in China without the required license is in violation of the law and subject to monetary penalty.

2. There are two types of co-productions of interest to foreign players. The first is “collaboration,” in which the Chinese side and the foreign side both invest cash in the project. The Chinese side provides both cash and infrastructure. In this case, the foreign and Chinese producers are co-owners of all the copyright and related intellectual property (IP) in the film. Contribution of assets and distribution of proceeds is flexible and is determined by contract. However, the whole arrangement is subject to approval by both CFCC and SARFT.

The second type of co-production is the “entrusted production,” in which the foreign side contributes all of the funds and hires the Chinese side to do the production in China. In this case, the foreign side owns the copyright and the related IP. This approach still requires the same approvals and reviews required for a collaboration.

3. The project must receive a co-operative production license from SARFT. Application is made through CFCC. CFCC reviews the script (which must be submitted in Chinese translation), the financial status of the foreign co-producer and the basic structure of the project, with particular emphasis on the percentage of Chinese actors in the film and the location of production work.

Matters such as capitalization and distribution are left primarily to the parties. However, the basic principle is distribution based on percentage of capital contributed. Initial review is done by CFCC and the regional (provincial) level of SARFT. Once approved at that level, approval by SARFT Beijing is also required. The regulations provide that SARFT Beijing must respond within 10 days. However, there is no rule on how long the lower level bureaus may take for their review.

4. The script must be submitted in Chinese. The script is reviewed and approved by CFCC for compliance with China’s various censorship rules. After the film is completed, the film is again reviewed to ensure that it accords with the previously approved script. The project is not complete until after the final review and the issuance of a film public showing license. The rules contemplate that the film will primarily be done in Chinese and then translated into foreign languages. The rules have no provision for films that are in English or some other foreign language in their original form. Presumably this is a matter that is subject to the discretion of the CFCC.

5. After the film has been approved and licensed, the co-producers enter into a co-production agreement. SARFT has a standard form for that agreement. In its most basic form, the project is treated in almost exactly the same manner as an equity joint venture. The producers open a joint bank account for deposit of the capitalization funds. Both producers have control over that account. The accounting too is similar to that of an equity joint venture. The co-producers share in profits and losses based on their equity contribution. An annual audit is conducted, profits and losses are allocated, and taxes are paid. Though the regulations and form agreements are silent on this, proceeds of the foreign co-producer presumably can be remitted on an annual basis after payment of tax is confirmed. Details of when and how capitalization occurs and when and how profits are paid are flexible and are set out in exhibits to the main co-production agreement. However, all such arrangements are subject to review and approval by CFCC and SARFT.

6. CFCC remains involved in the project after production begins. For example, CFCC handles the visas for foreign workers and the customs for any imported production equipment.

7. In principle, all production work is done in China. Work can be done outside China, but only with CFCC approval.

In my next post(s), I will discuss the tax, international money transfer, collection agent and completion guarantor issues that often arise in the context of financing Sino-foreign film co-productions in China.

  • film maker

    Thanks for running this. I had actually been wondering how all of this worked. You have made a complicated issue much clearer for me. Just not sure now whether I am even going to bother.

  • William

    What a nightmare! But it’s probably no more unpleasant than dealing with Hollywood labor unions.

  • Thank god I ignored all this when I shot Shangdown: The Way of the Spur in Shanghai last year 😉

  • Ron Day

    CFCC approval. Good luck with that.
    Is Speilberg reading this? I doubt he needs too.

  • I don’t know if this technically falls under the category of “Sino-Foreign Film Co-Production”. But it’s still hilarious.
    It’s a story about a Chinese real estate magnate bankrolling a Hollywood-styled 3D mermaid movie, complete with Bond girl!
    “Empires of the Deep” was supposed to be out this summer, but I’ve seen no sign of it yet…

  • Rupert Jones

    I think Jakob Montrasio (comment above) is crazy for bragging about the illegal film he made in China. I take it he plans on never returning to China again because I am sure that by now half of China’s government is aware of what he did and he will be arrested upon entry and imprisoned on national security grounds and fined. What is the mentality of someone who feels the need to brag about his crime? We all know that it is possible to violate Chinese laws and not get caught, so so what?

  • Harland

    So…what are these censorship rules? That would be a much more interesting blog post.

  • Maduka

    Joyce Lau,
    I read the article and I admire the gutsy “can do” attitude. The film may flop, but can you not see a very American optimism on display?
    This tells me a lot about China.

  • Agree with Harland. In China, since censorship is such a big issue, it is important to know what a foreign film maker (even if he/she collaborates with a Chinese one) can or cannot do.

  • Anon

    Not mentioned in the article or the comments is that if you are not legal you also have a greater chance of some government functionary calling out the thugs to rough you up for filming in his little fiefdom. I am a foreign reporter and this happened to me once when I filmed without permission. I am glad I did it nonetheless, but this is something to think about.

  • I’m interested in making a film in China, but I need to know what the censorship laws are. Where can I find them?