China Film Bureau chief Zhang Hongsen said the country's film business is at war with Hollywood and needs to dramatically up its game if it is to survive when the quota for foreign film imports is raised in four years' time.
"This is the year when the battle between Hollywood and China really begins. Chinese films are encountering serious challenges and 2014 is a crucial year to decide who the winner will be," Zhang, a director at the powerful regulator, the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT), told a forum on the domestic film industry.
His comments are the highest profile acknowledgment yet of the need for the Chinese industry to improve its strategy as it faces down a growing threat from Hollywood.
This is shaping up to be a big year for Hollywood in China, the world’s second largest market.
Chinese movies came out just ahead of foreign films in box office last year, largely boosted by Stephen Chow's Journey to the West: Conquering the Demons, which grossed $215 million. Donnie Yen's The Monkey King and reality-TV adaptation Dad, Where Are We Going? did well during the Lunar New Year holiday in February, but since then Hollywood tentpoles have put in strong performances — Bryan Singer's X-Men: Days of Future Past, has taken $116.49 million so far, and many believe Transformers 4: Age of Extinction could do even better than Avatar’s $221.9 million all-time China box office record.
"With the release of Transformers 4: Age of Extinction, domestic film’s market share will fall below 50 percent," said Zhang.
He called on theater chain owners not to give Age of Extinction 100 percent of the screening time and encouraged them to help boost locally made product.
"The Chinese film industry has grown 34.57 percent annually from 1 billion yuan in 2003 ($160 million) to 21.7 billion yuan ($3.48 billion) in 2013 — just 10 years. But this is just the initial stage, not a mature stage and also not a final stage. And at a stage like this, we face serious challenges," said Zhang.
Hollywood has long pushed for free trade in the booming Chinese film market, and Zhang said restricting foreign movie imports to 34 titles a year will be lifted in 2017 as Beijing honors a memorandum of understanding agreement on its current quota system with the World Trade Organization in 2012, valid for five years.
With Hollywood constantly adapting to the Chinese market, the Chinese film sector will be hurt badly, he said, so the industry has just four years to face up to challenges.
The pressure was on Chinese films to be more diverse and of better quality. Theaters were of much higher quality now but film production levels had not kept up, he added.
The success of Lost in Thailand, which took $200 million in Chinese theaters in 2012, inspired domestic movies and released their collective force.
This made Hollywood think carefully about its China strategy, Zhang said. Among the cunning measures Hollywood is taking to boost its presence in China is adding Chinese elements to the movie.
Transformers: Age of Extinction used popular Li Bingbing and heartthrob Han Geng, and young actors in the fourth installment were chosen via a Chinese reality TV show.
Hollywood studios are also doing major promotions by sending directors and stars over to China to push the movies.
Recent months have seen big names such as Angelina Jolie, Scarlett Johansson, Andrew Garfield and Johnny Depp come to China to promote Hollywood fare.
Zhang said that if Hollywood films keep coming to China without any restrictions, the Chinese government will no longer be able to provide favorable conditions for the domestic industry. Also American distributors will hold all the power in terms of distribution, taking away power from domestic distributors, leading to a focus on U.S. profitability rather than domestic concerns.
“The main point is that we need to defend and fight for our cultural territory. On the economic aspect we will have to see if we will be forced to surrender,” said Zhang.