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Can the UK and Chinese film sector find new connections?

A new supportive policy environment for transnational film making

The UK is one of the largest film exporters in the world, with box office revenue reaching $9.4 billion in 2015 - 26% of the global film market. While the UK’s traditional film sector trade partners are the US, Europe and Australasia; presently the market share in China is limited.

The rapid growth of the Chinese film market has made it a highly significant consumer of film. China’s cinema audience reached 1.26 billion in 2015, a 51% increase on the 2014 total. 2015 also saw box office revenue reach a record 40 billion RMB, a 48% increase on 2014.

China’s quota system on non-domestic titles means that of the 358 films released in China’s cinemas in 2015, only 80 were non-domestic titles - the majority of which being Hollywood productions. Despite these quota restrictions, however, foreign titles took 38% of China’s total box office revenue in 2015, indicating significant potential revenue over which competition is fierce. Comparatively few British films have been released in China to date, however last year’s James Bond movie Spectre was one of the strongest performing non-domestic films in China, grossing 557 million RMB at box office.

Production Agreements

The signing of a UK China Film Co-production Agreement in April 2014, negotiated by the BFI and co-signed by Vice Minister of China’s State Administration of Radio, Film & Television (SARFT) Mr. Tong Gang, presents another way for UK films to reach the Chinese market. Films that qualify as co-productions under the agreement are treated as domestic films, and can therefore access the benefits open to domestic films, such as fiscal treatment. British films under the co-production agreement qualify, for example, for UK Film Tax Relief or for the BFI Film Fund. Crucially for the UK, co-productions under the agreement can also access import arrangements and the lifting of quota restrictions on film imports. BFI CEO Amanda Nevill stated:

“This film Co-Production Treaty represents a hugely significant moment for UK film and opens the door to a relationship with the largest growing film industry in the world.”

In October 2015, Shanghai Media Group (SMG) and the BBC announced their plan to co-produce Earth: One Amazing Day, a film sequel to the BBC’s popular Planet Earth documentary. Chief executive of BBC Worldwide Tim Davie stated:

“There is a keen appetite in China for premium British content… (creating) new cinematic experiences in partnership with SMG Pictures is a landmark moment.”

Investment Funds

Although the co-production agreement offers an avenue, some co-production film ventures may benefit from up-front financial support as well. In October 2015, a new £50m China-UK Film, TV and Media Investment Fund was created. Half of this initial capital will be provided by China’s Beijing Zhongze Culture Industry Co. Ltd. and Propeller Culture and Media (Beijing) Co. Ltd, with the UK’s Pairstech Capital Management LLP and Varcale Management Ltd contributing the other half. Zhongze, like many Chinese state-owned enterprises has been encouraged by the government to branch out into the cultural industries. Beijing Zhongze Culture Industry director of film, media & entertainment Gina Fegan stated that the fund is looking to support “material that is market-focused and is going to deliver either in China or the UK”. It will also support “other forms of entertainment as well as the supply chain”. Varcale and Pairstech added in a joint statement that:

“Although the fund will predominantly cater for the demand in the China market, we will also capture the UK and international entertainment markets as appropriate.”

So far, the fund has formed strategic partnerships with four UK companies. It will support three films from UK production company BB88, backed by Goldfinch Entertainment. Independent Talent Group will be supported to establish a Beijing office to manage Chinese talent. Youniverse will receive funding to produce a feature film with the UK’s New Media Creator Network (NMCN). Glasgow based Distrify Media will receive investment to support and expand the digital distribution of UK and Chinese content.

Overall, this presents a supportive policy environment combined with tangible financial support, offering a means by which UK and Chinese film sector players can take advantage of skills, talent and markets outside their borders.

- The BOP China team