There was a time, not too long ago, when a struggling Hollywood blockbuster could count on China to save it. A soft domestic opening was worrying but manageable. China would emerge. In the same way that investors once saw emerging market growth as a permanent condition, studio executives held this belief with a sort of quiet confidence. The end of that era was not a quiet one.
For a long time, the math seemed convincing. In 2012, China’s box office receipts increased by 36% to $2.7 billion, and the trend continued to rise. China agreed to import at least 34 foreign films per year, and a WTO-backed agreement increased the profit share for foreign studios from somewhere between 13% and 17% to a cleaner 25%. Hollywood reacted by leaning in hard, as it always does. A special version of Iron Man 3 with an additional scene starring Chinese characters was cut by Disney, and the movie made $65 million its first weekend in China. It seemed to be the start of something.
What came next was more difficult. In violation of the original terms of the agreement, the China Film Group started deducting a 2% tax from studio payments. For a while, Hollywood completely stopped getting its cut of the profits from some of the biggest releases of the year because it refused to bear the expense. There’s a sense, looking back, that this dispute was a preview of things to come — a sign that the relationship was transactional at best, and vulnerable at worst.
Then the bilateral film agreement expired in 2017 and was never renewed. Although there is no longer a framework that guarantees access, China has continued to permit American films. Anytime it serves a political purpose, it can be modified or discontinued. That possibility, vague but real, now sits somewhere in the back of every major studio’s planning process.
Additionally, Chinese audiences have just moved on. The share of foreign films in Chinese ticket receipts fell from 36% in 2019 to 16% in 2020. Local studios are producing films that Chinese viewers connect with far more directly — “Detective Chinatown 3,” “Hi, Mom,” “The Eight Hundred.” These are not B-grade substitutes. In 2020, four Chinese-made movies were among the top ten grossing movies worldwide. Hollywood used to have an advantage due to the quality gap, but that gap has mostly closed.
American studios, meanwhile, have suffered from errors that go beyond simple box office calculations. Disney’s Mulan was criticized for both its Xinjiang filming location and how it depicted Chinese culture. Following a social media backlash over a single line of dialogue, Sony’s Monster Hunter was removed from Chinese theaters. It’s difficult to ignore a pattern: American studios attempting to appeal to Chinese audiences, making mistakes, and then rushing to make amends. Cultural relevance is difficult to engineer from a studio lot in Burbank.
American film producer Chris Fenton put it bluntly: local studios are now creating high-caliber, culturally relevant work that Hollywood just cannot match, and Chinese consumer sentiment toward American goods is at an all-time low. The days of China’s market rescuing a mediocre movie are finished.
What’s left is a market that still matters — China may yet return to near its pre-pandemic highs — but one that no longer plays by the rules Hollywood assumed. Access is not guaranteed. It is more difficult to win over the audience. The profit-sharing agreements have shown themselves to be brittle. And the geopolitical climate adds a layer of unpredictability that no studio executive can fully plan around.
Hollywood’s next course of action is still unknown. The Chinese market is too big to ignore, but it’s too erratic to rely on. The studios are still figuring out how to handle this tension, but they are doing so without the same level of comfort. The golden window is no longer open. Anyone can speculate as to what will happen next.
