Inside China and Hollywood’s Frayed Relationship: ‘We Need to Stop Trying to Keep the Status Quo, Because the Status Quo Is Gone’

The tea leaves aren’t difficult to read: China and Hollywood can bid adieu to any attempts at in-depth cultural collaboration for the foreseeable future as relations between Tinseltown and the world’s largest film market enter a new, unprecedented chapter.

In wide-ranging interviews conducted by Variety, a dozen producers, studio executives and industry org representatives have said that 2022 will be a chapter marked not only by bilateral friction between the two superpowers, but by the Chinese film industry’s decoupling from the broader global film industry as a whole, as the country turns inward under President Xi Jinping.

Under the veil of COVID-19 isolationism, the past two years have seen Beijing unwinding the Deng Xiaoping era of reform and opening and shifting back towards a top-down management system for content creation in ways that will affect Chinese creatives in the years to come.

In this new frontier, China’s U.S.-listed behemoths are ditching Wall Street, delisting and coming home; longtime U.S. producers working between East and West are pivoting away from China towards other Asian markets; and ambitious Chinese firms that once dreamt of building bridges across the Pacific have turned towards the more tangible rewards of making local content in step with the Communist Party’s vision of the times.

Conor Zorn, Tencent Pictures’ former director of international, left his post in June after nearly six years, feeling that the combination of the trade war stalemate and COVID-19 travel restrictions between the U.S. and China felt like a “death knell” to his goal of helping the dynamic firm develop content that could travel globally.

The executive describes a “change in rhetoric between both sides that has made it fairly impossible to move anything forward.”

Zorn, who is based in Beijing, had once been tasked with developing projects such as the pioneering Tencent and STXFilms co-production “New York Will Eat You Alive,” a Hollywood adaptation of a popular Tencent comic IP that at one point had Colin Firth and director Todd Strauss-Schulson attached. He has now made a “conscious effort” to pivot away from work in China.

“The partition between politics, political agenda and content-making is completely eroded there. No matter what talent or corporations want, it’s always at the behest of what the Party is pushing for and asking for. When Tencent rearranged its budget allocation and made a push to be more heavily invested in more propaganda-type films, I think that said enough for me,” he explains.

“None of this was in writing, but for a company like Tencent, it just felt like the value of a co-production, even if it was quasi- or even significantly financially successful, seemed to be of less importance than a film that potentially lost money but seemed to be the right topic politically,” Zorn adds.

Foreign content represents only 13% of China releases

Certainly, the diminishing profile of foreign content has never been clearer than in 2021. As of mid-December, only 65 imported films were released in China this year, accounting for just 13% of all films — down from 20% of films in 2020, 23% in 2019, and 24% in 2018, according to data from Alibaba’s Beacon platform. Among them were 25 American titles, down from 45 in 2019.

Where once franchise films could more or less rest assured of a release if earlier instalments had hit Chinese cinemas, now many hang in limbo, including Marvel titles “Black Widow,” “Shang-Chi and the Legend of the Ten Rings,” “Eternals” and even the hotly anticipated “Spider-Man: No Way Home.”

Easier days of frequent day-and-date releases are “definitively behind us,” assesses entertainment lawyer Schuyler Moore of Greenberg Glusker. “That party is over. No question.”

“Xi Jinping’s goal is absolutely to have Chinese films play worldwide just like Hollywood movies, so that China can exert soft power and replace Hollywood. There’s no way they’re going to be cooperative going forward, allowing U.S. films into China,” he explains. “Some films will get through, but they’ll be ones China likes, when they want, and there’ll be fewer and fewer until the tap gets shut off completely, the way it’s being shut off this year.”

The tap will truly close, he believes, at the first hint of military conflict between the two superpowers, such as the moment there is any significant gunboat diplomacy in the South China Sea.

When China barged into Hollywood between 2014 and 2017 or so, they were making deals that allowed them to grow the expertise necessary to build their own industry. “Without question, every investment that they made was tied to getting this sort of information. Every single one,” says Moore, a veteran of cross-Pacific deals who has represented clients such as Alibaba Pictures, Hunan Group and Perfect World. “They learned, and then they rolled up the ladder and went home.”

Chris Fenton, the former president of DMG Entertainment who worked on U.S.-China co-productions like “Looper” and “Iron Man 3,” echoes the sentiment.

“I think about every moment of my career with China, and it’s so obvious now…We could sell them fish as long as we taught them how to fish,” he says.

Continues Fenton: “They wanted to create imitators and an industry that can compete with us on a world-class level. Now that they’ve done that, they have no motivation to allow any of our movies in. We need to stop trying to keep the status quo because the status quo is gone.”

China further walling itself off comes as no huge blow to the independents, who have already been almost entirely shut out of the market since 2018 anyway. That year, the Trump administration issued its first trade restrictions against the country, and by Cannes in May, major Chinese buyers were already saying that authorities wouldn’t approve any independent U.S. product for release.

The period brought trade to a “dead halt” after the relatively halcyon days of 2012 to 2014, where new cinema construction kept up demand for both studio and indie American titles, a period when independents held on to some 15% of market share, said Susan Cleary, the Independent Film and Television Alliance’s VP and general counsel spearheading many of its China initiatives. Since then, their market share has been “practically obliterated,” she says, down at most recent count to just 1.7% in 2019.

“The politics were always there, but they were subordinated to growth. Now they’re not subordinated,” explains IFTA CEO Jean Prewitt. “We went from thinking we understood a system — albeit one where you couldn’t necessarily push a button and know what the results were — to a system that was just a black hole, where rumors are rife.”

Hollywood is starting to discount Chinese revenue

The arrival of a new normal is already being felt as Hollywood begins to tighten its belt without the prospect of the Chinese market. Investors at the moment are already “very, very wary” of trying to develop profit and loss statements that assume any Chinese revenue whatsoever, says one American producer.

“Too many mishaps have occurred. Hollywood will now have to rethink how they do their P&Ls for big international movies,” says the producer. “There’s nothing that’s failsafe.”

Once the China market is no longer such a governing factor, storylines and scripts will change, numerous interviewees predicted. “They might finally cast Richard Gere. There might finally be a Chinese bad guy,” jokes one producer source.

Yet some, like Colby College sociologist Philip Fang, author of the forthcoming ethnography “When China Meets Hollywood,” thinks such changes still remain a ways off. 2021 was, after all, unique due to the ongoing pandemic and the Communist Party’s 100th anniversary in July, a milestone marked by a long blackout stretch over the summer on non-political content.

The marriage of convenience between China and Hollywood may be on the rocks but isn’t annulled just yet, he says, especially considering the market is simply too big for U.S. studios to relinquish. Plus, he argues, the Chinese market isn’t mature enough to kick Hollywood out for good.

“A healthy industry needs a more consistent line-up of very good movies and different types of movies, not just two or three blockbusters like ‘Hi, Mom’ and ‘Battle at Lake Changjin’ that can break out as a great success. China is not there and won’t be there for more than 10 years,” says Fang.

Meanwhile, Chinese leadership also can’t entirely write off the continued audience demand for Hollywood blockbusters.

“Party legitimacy is built on people’s satisfaction on whether they perform,” says Fang. “The government can’t just cut off Hollywood entirely because audiences will want to watch the movies. The party has to balance between what it wants and what the audience wants.”

Most interviewees expect China’s heightened vigilance towards U.S. films to continue until further political milestones have passed in the second half of 2022.

Even so, former Tencent Pictures executive Zorn speaks about U.S.-China film collaboration in a jarring past tense.

“There was this beautiful idealistic concept that we could strengthen our mutual understanding by getting Tencent to LA, sitting with writers and producers and having an exchange,” he laments. “The shame is that now that has collapsed, and China’s restriction on travel means that we are not talking, we are not communicating, we are not exchanging ideas, which breeds doubt, fear, concern, distrust — going against all the things we were building for years, whether it was for the sake of film or not.”