China film industry: more reliance on internal substance and less dependence on foreign intellectual capital

The Chinese film industry more than quadrupled in size from being worth $250 million in 2005 to an industry raking in $1.5 billion in revenues in 2010. This has left America's mostly cash-strapped Hollywood gearing up to cash in on the rapidly growing Chinese market. China's central government sees a well-developed film industry as an essential ingredient to building a consumerist society. It has so far invested in serious infrastructure to back that goal opening up to three new theatres everyday. At present there are 6,000 screens across China most of which are equipped with modern digital projection facilities.

Fortune.com reports that much of this awesome feat of industry building was achieved while maintaining a draconian protectionist policy against foreign competition...

China has historically upheld a quota system granting only twenty U.S. films per year access to Chinese markets -- a far more restrictive regime than those of most countries. Even those films that are granted access to China face major difficulties making profits, due to highly restrictive box-office profit sharing agreements.

Avatar, for instance, made $200 million in China last year, but the proportion of the box-office receipts that went to the studio were between 10-15%. In most other countries, around 50% is standard. And China shows no signs of changing, despite a high profile recent WTO decision declaring that China must give equal treatment to foreigners as it does to domestic companies in its film distribution network.

Clearly the Chinese do as they see fit for their national interests. That's because they can. While most developing countries are hopelessly dependent on foreign input to prop up domestic substance, China produces its own content indigenously and works hard to continuously improve quality.

For most of the last decade, Chinese production houses, nearly all of them backed by China Film Group, the country's most influential state-run filmmaking and film distribution enterprise, produced costume dramas about the history of China that generally followed a very specific political line. In the last two years, more diverse films have emerged, such as Aftershock, an earthquake melodrama, and Let the Bullets Fly, a witty Chinese Western, each made over $100 million in local box office sales.

Even the propaganda films have learned from Hollywood and are evolving artistically -- and selling better as a consequence. In 2009, The Founding of the Republic, China's celebration of Chairman Mao that coincided with the 60th anniversary of the Communist revolution, starred nearly 200 of China's best-known actors, including Kung Fu legends like Jackie Chan and Jet Li, and was widely praised for its artistic integrity. Now, the scent of commercial success seems to be fueling more investment and turning Chinese film industry growth into a self-fulfilling prophecy.

The Philippines' key economic aspirations, in contrast, rely on a growth model underpinned primarily by capital infusion coming from foreign direct investment (FDI) and consumption-based commercial activity spurred by unfettered importation of non-durable goods.