By Eric Vandenbroeck and co-workers

“It’s not as explicit as Beijing handing out orders,” writes Amanda Morrison for Foreign Policy.” Instead, the government has shifted its approach from direct intervention to indirect incentivization by shaping the economic conditions of the film industry to favor patriotic cinema.

The movie was scheduled to open the Shanghai film festival in June 2019, but its release was suddenly canceled just days before, owing to “technical difficulties.” One of the problems with the Sihang warehouse story is that the resisting Chinese forces were from the nationalist side, the Kuomintang. Later, they were defeated by Mao’s communists and retreated to Taiwan in 1949. At one point, the soldiers rally round the flag, Iwo Jima-style, as the Japanese try to shoot it down – except the flag is that of the Republic of China (red, with a white sun on a blue square in the corner). It is now the national flag of Taiwan. Last year was the 70th anniversary of the People’s Republic of China, so for the ruling Communist party to be glorifying the future founders of Taiwan was not a good look.

In a revealing comment, the secretary-general of the China Red Culture Research Association, a government-affiliated group, reportedly said of the film: “It is a reversal of history and misleads the audience. If left unchecked, it will certainly deprive the entire Communist party of its historical basis. Once the party’s leadership is lost, the Chinese nation is bound to fall into the deep, miserable abyss of colonized and semi-colonized countries.”

The biggest thing is not the censorship itself; it’s the unpredictability of it. The things to avoid are pretty much the same – chiefly politically sensitive issues such as Mao, Tibet, the Tiananmen Square massacre, and Hong Kong democracy – but if you’re a filmmaker, investor, or producer. You know that your film could get yanked the day before it’s supposed to be released, even after you’ve spent all your marketing money, it’s a problem.

As we have seen, it is also a problem for Hollywood filmmakers, who are effectively playing by the same rules to get their product onto China’s screens. In a report last month, PEN America condemned Hollywood’s pro-China self-censorship. “As U.S. film studios compete for the opportunity to access Chinese audiences, many are making difficult and troubling compromises on free expression,” it said.

COVID-19 was a one-time, cataclysmic event, but it also pushed both entertainment industries more quickly in the direction they were already headed - away from each other. For starters, with Hollywood delaying most of its major 2020 and 2021 releases from their theatrical debuts, Chinese audiences’ growing preference for Chinese films became even more apparent. Chinese streaming services had once proven a lucrative outlet for Hollywood studios, which could license an entire annual slate for more than $80 million. But around 2018, viewer interest in such films fell in favor of Chinese T.V. dramas. The few post-pandemic Western movies released in China, such as Wonder Woman 1984 and F9, attracted a fraction of the expected theatrical audiences. Studio balance sheets continued to plan for nine-figure windfalls out of China, but Chinese audiences were not providing them. The previous several years had dug a hole into the accounting ledgers that became impossible to fill. 

While China was cementing its status as the most significant theatrical market, Hollywood was focused on going smaller - and getting people to tune in at home. Executives in Los Angeles directed efforts to the competitive arena of streaming, hoping to draw business away from Netflix. Every major studio but one launched a streaming service between late 2019 and the end of 2020. Their movies became never-ending collections of “content” that filled each platform’s library, convinced users to subscribe, and ultimately boosted the parent company’s share price. Netflix, which had started as a DVD-by-mail company, had a considerable head start and released more original movies per year than all Hollywood studios combined. The few movies still treated to the wide theatrical release now had to convince filmgoers they were better than anything they could find streaming on the couch. The one hundred years of Hollywood dominance, marked by big-screen palaces and stars exalted as gods, felt as though it was being replaced by a shrunken model that treated movies as interchangeable feedstock for streaming services.

Netflix had expanded to dozens of countries worldwide; by early 2021, only about a third of its subscribers were in the U.S. The list of countries where Netflix did not operate included Syria, North Korea - and China. The company had tried to break into the Chinese market for years, especially as streaming shows and movies became increasingly popular. Netflix founder Reed Hastings met with authorities to convince them to let his company compete alongside streaming services run by Chinese firms like Alibaba. But China wanted its homegrown industry to flourish without foreign competition. Netflix could get into China only by licensing its most popular shows to Chinese platforms, which turned House of Cards - not exactly the most flattering depiction of American politics - into the top-performing American play in the country. Anything more ambitious was unlikely to happen. 

Since it sees no future in the market, Netflix has been one of the few entertainment companies operating with little concern about alienating its leadership. It regularly signs deals to stream Chinese blockbusters like The Wandering Earth, targeting the considerable Chinese diaspora worldwide. But its failure in China has also led to the company’s green-lighting documentaries about topics otherwise off-limits, such as the protests in Hong Kong calling for independence, or even movies like Steven Soderbergh’s The Laundromat, which featured a subplot on corruption in Xi Jinping’s family. Netflix’s failure in China has given it a freedom few others in Hollywood enjoy, even as it censors movies and shows for countries where it does operate, such as Saudi Arabia. 

As Disney gained traction with its flagship streaming service, Disney+, during the pandemic, share prices climbed as investors valued the company as they would a tech firm, where present-day losses are forgiven in exchange for the promise of continued growth and future profit. Significant releases on the Disney slate started premiering on Disney+, skipping the theatrical release. A future of movies streamed at home was terrible news for one of China’s most high-profile forays into American entertainment: AMC Theatres. Wanda’s investment in the company had initially looked like a moneymaker after AMC went public. But Chairman Wang Jianlin’s aspirations to be the biggest movie theater operator in the world stretched AMC past its limit, setting it up for a complete financial meltdown when the pandemic hit. Wanda had pushed AMC to acquire smaller circuits like Carmike Cinemas, deals that gave it bragging rights when it became the number one theater chain in the world. But that distinction also saddled its balance sheet with sticky-floored ghost auditoriums in lousy markets. That became clear when the pandemic closed all theaters, and AMC had just barely enough cash to survive. All of its employees were furloughed, including its CEO. While China’s box office soared past the U.S. that October, AMC looked like it would end 2020 in bankruptcy proceedings. But then a Reddit community of online traders, many of them nostalgic for the moviegoing of their youth, drove AMC shares to record highs, soaring 470 percent in the early months of 2021. Wanda steadily sold its stake in the chain. At the same time, the market manipulation allowed it to cash in on the craze, escaping the investment with unexpected riches thanks to a fluke in the American economic system. Besides, Wanda still had theaters in the bigger market, China. 

A streaming-first Hollywood not only signals a possible end to the traditional American theatrical experience but also places more power in the hands of the companies that will likely supplant Paramount and Sony as the most recognized names in entertainment. As tech giants like Apple have moved into film and T.V. production to support their at-home services, they have not brought with them a liberalization in storytelling but instead contributed to a risk-averse landscape where specific topics about China cannot be broached. “The two things we will never do are hard-core nudity and China,” Eddy Cue, Apple’s senior vice president in charge of its entertainment strategy, has told creative partners in Hollywood. In China, the company has a maze of supply chains, factories that make the iPhone, and a customer base of Apple users it cannot risk losing by dabbling in themes that might offend or alienate a Chinese audience. To compete with companies as dominant as Netflix, Apple, and Disney, smaller studios will merge and bulk up, further enveloping Hollywood in a morass of complexly connected conglomerates that put multiple holdings at risk if they anger China, which not only is the biggest box office in the world but will soon be the biggest economy in the world.

China’s economic recovery from Covid-19 made more than just Hollywood reliant on the country’s consumers. In early 2021, one company after another reported earnings where China was among the few if only, bright spots on the balance sheet. iPhone sales in China rose 57 percent for Apple. Louis Vuitton set a global sales record at its Shanghai flagship store, selling $22 million worth of merchandise in a month when most U.S. was under lockdown orders. Tesla more than doubled its revenue in China. Same-store sales at Starbucks recovered faster in China than in the U.S. Nike reported sales flat in North America but up more than 20 percent in China. Ericsson, the telecom firm, beat Wall Street expectations thanks to 5G contracts in China. It did not matter if you sold cars or coffee. If you wanted your company to survive COVID-19, you would need China.

To many moviegoers at Covid-19, the most prominent Chinese filmmaker working was Chloé Zhao, a thirty-nine-year-old daughter of a Chinese steel magnate. Educated in the West, her meditations on the American frontier and struggling classes in films like The Rider and Nomadland won her high praise - and a job directing a Marvel Studios superhero epic. When Zhao became the front-runner to win a Best Director Oscar at the 2021 Academy Awards for Nomadland, about a sixtysomething from Empire, Nevada, who must live in a van following the 2008 financial crisis, it appeared the little gold statue that China’s executives and leaders had so desired was within reach - and in the same year as its box-office ascendance, no less. But when an eight-year-old interview with Filmmaker magazine surfaced, Zhao said China was a place with “lies everywhere” and that she considered her country to be the United States, a filmmaker whom state media had called “The Pride of China!” was blacklisted. References to Nomadland, which Chinese fans had cited proof that America offered no safety net for its most vulnerable residents, were scrubbed from Chinese movie websites. Zhao’s comments made her a new target for the rising movement of ultranationalist Chinese citizens, online mobs who policed the remarks and actions of those in the West. Many of them had grown up watching pro-China movies during the Wolf Warrior era of Chinese filmmaking, and they took the fight online.

If Zhao had assumed she would be moving to a freer industry when she left China to make movies in the U.S., she was rudely reminded that America’s entertainment business was already playing by Beijing’s rules. The studio behind Nomadland, the Disney-owned Searchlight, successfully lobbied Filmmaker to remove Zhao’s comment from the online version of the interview. But the damage was done. When Zhao won the Oscar for Best Director, it was heralded as a breakthrough in the U.S. since she was the first woman of color to receive the honor. In China, it was as if the Oscars had not been held, and Zhao’s career was frozen in time. The day after the ceremony, searches for Zhao on the country’s significant sites yielded only old news. The country’s propaganda ministry ordered state media journalists to ignore the story, and celebratory messages posted by everyday Chinese citizens were found and deleted. The Oscar had loomed large in the collective imagination of China’s entertainment pursuits, and now it was finally in hand. But in the eyes of Chinese leaders, national pride and sovereignty would always trump glitz or approval on the world stage. 

The Oscars incident justified a more intense crackdown on their country’s filmmakers to China’s leaders. Famous commercial directors whose careers had risen with the box office were expected to declare publicly they were “of the system” and would make movies that backed the state. The names of Hong Kong-based producers were ordered off movie credits. The Ministry of Propaganda, now years into controlling the country’s entertainment industry, functioned as a studio in Hollywood’s original system, overseeing a collection of actors, directors, and artisans it could plug into any pro-Party movie it wanted. Party officials maintained a list of approved plots and themes. Winning over audiences in foreign countries took a back seat to rally the faithful at home. 

China’s leaders had already signaled where the country’s entertainment industry was heading in a plan outlined in 2019 by authorities at the National Film Bureau and the Central Propaganda Department. By 2035, sources said, China should be a “strong” film power, one that produces movies that stir patriotic feeling in viewers, written and directed by teams with a “clear ideological bottom line.” A strong film power was distinct from China’s, a significant power capable of large grosses but little influence. It harkened to a description Chinese intellectual Jiang Shigong made of his country. The story of China under Mao, he said, was one of “standing up.” Under Deng Xiaoping, it was a story of “becoming rich.” Under Xi Jinping, the story is one of “becoming strong.” 

Xi had enlisted his country’s entertainment industry, reimposing the Maoist expectation that art would serve the state. China’s film business can look a lot like America’s from a distance, with its studios, national theatrical footprint, and glamorous movie stars. Like many technology transfers, this one would take the tools of the West while maintaining its Chinese essence - and in this case, its Communist Party mandates. Above all, China’s on-screen reality would reflect its off-screen moment in history, the officials at the National Film Bureau declared. “A country’s level of film development reflects its total national strength,” officials said. No one believes this more firmly than Hollywood, where a different bottom line first intertwined studios with the country more than twenty years ago. 

As tensions flared between the two countries, sources and friends in the China-Hollywood ecosystem operated with even greater trepidation. “We need to speak in code,” one executive cautioned at the start of a phone call from Beijing. Any remark that accidentally veered into a sensitive topic caused the conversation to fall silent, a self-censorship record scratch. For years, China’s entertainment industry followed a pattern of opening and then contraction, but in a two-steps-forward, one-step-backward march of progress. Now, under Xi, it was all moving in the wrong direction. Any plans Hollywood had for conquering those screens have turned in on themselves.

Can that conquest be reversed? Almost as soon as he became president, Joe Biden began repairing relations worldwide frayed by Donald Trump’s presidency. Even in his administration’s early days, Biden sought alliances that might build a bulwark against the Chinese influence of his former film-quota negotiations partner, Xi. He called it a Summit of Democracies. Together these countries would deepen investment and technological ties that reduced dependence on China, especially in sectors, like artificial intelligence, that China sought to dominate. A renewed focus on democratic values would turn back the autocratic trends deep in China and festering elsewhere. 

But he may have been too late. Countries across the European Union and democratic nations already had established investment ties to China. Around the world, including in Kenya, Biden officials pursued trade agreements and alliances that would try to counter the China sales pitch. But whereas China’s entertainment industry was considered an arm of Beijing’s campaign, Hollywood focused on streaming subscribers and ensured it did not alienate its most important foreign market. It was a different reality than the one seen in the previous century when people in every corner of the world absorbed a romantic vision of America from the movies and other forms of soft power. China’s challenge to the American model revealed the degree to which the U.S. had taken such influence and easy affection for granted. 

Whether China’s entertainment industry ultimately prevails in its greater ambition of selling its country and its values to the world will be determined in this next century. That quest will also serve as a global referendum on which system will most inform the way leaders govern, states surveil, consumers spend, and citizens converse. Once America’s most persuasive evangelist, Hollywood remains beholden to another country. 

We are about to watch the final act in a classic tale. China started this century as the savvy ingenue, eager to learn. Countless Hollywood movies have taught us what happens next. The ingenue grasps for the leading role.

 

 

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