Thankfully there is loophole, however - Australia's co-production treaty with China offers a method to get around the import quotas on foreign films.
So it was worth hearing from some Aussie producers talking at the latest SPAA conference about their experience working in China.
The experts talking included:
- Paul de Carvalho - Director of Production Attraction (Screen NSW)
- Mario Andreacchio - Executive Director of AMPCO Films
- Pauline Chan - Producer
- William Feng - Chief Representative (China Office) of the Motion Picture Association (MPA)
- Mathew Alderson - Counsel at Harris Moure pllc (Beijing)
The film business in China is extremely restricted - this is a reality and needs to be taken into account well in advance - well before preproduction.
- First has to be approved as a coproduction by the CFCC.
- Then you have to apply for a filming permit - after you start pre-production.
- The filming permit introduces script changes.
eg: The filming permit for the Chinese version of 'High School Musical' was withheld because the film was seen as encouraging disrespect between students and teachers.
- There are also additional permits needed for filming in certain regions - eg: A Temple
- Once you have the film permits you have to sign a declaration that the CFCC can sign off of the final cut - and that the CFCC have the right to make any changes they wish.
If you don't want the CFCC to make those changes - then the CFCC have the right to with-hold the film from ANYWHERE IN THE WORLD.
Those are the approval elements that you have to balance - especially with private investors. How do you build in security that you will have a cut that is acceptable to the rest of the world?
On the other hand the CFCC are trying to encourage production.
Both 'Mao's Last Dancer' & the Chinese version of 'High School Musical' chose not to tick all the boxes for approval but went ahead with pre-production anyway ..... which caused major problems later. In the 'High School Musical' example, they were 4 weeks from shooting when they found out that the reason the Filming Permits weren't coming through was because of the perceived disrespect for teachers shown in the script. So they had to dismount production and do a page one rewrite.
One issue is that those who provide the permits rarely say 'No' ... they simply don't respond ... until the film-makers learn to read between the lines and see what changes need to be made to get a 'Yes'. They don't tell you specifically that the screenplay has problems - they simply don't authorise the permits.
Film makers expect that things will change so that China will be like other places. It won't. If you think so it will be a disaster.
Getting the Right Chinese Partner
Pauline spoke about the frustration at spending $1 or $2million .. and end up with the wrong alliance. You need to remember that what we consider to be a single country is effectively 12 different regions - and finding the right partner for your project is vital.
In one example the original partner claimed that they had everything under control and that they had a filming permit. In fact they only had an INTENT document - not an actual permit.
They also have the same problem we see in the West with partners who talk big but end up not being able to contribute any real money.
In the end she changed to a Hong Kong Partner - Fred Wang at Salon Films.
Getting Money out of China
A major problem is that there are no collection agencies in China so without independent audits for income there is simply no transparency.
The only real income is box office - there is real difficulty with having 100% of box office receipts coming in via the official co-producer. While many people think that it will open up soon, in reality all indications point towards the opposite.
The simple reality is that most Chinese Businesses are simply not set up to send money out of China - and you will probably never see any box office income appear in your off-shore account. A Chinese business actually has to get special approval from SAFE (the State Administration of Foreign Exchange) to transfer money offshore.
Pauline Chen suggested that the best strategy is to simply write off all Chinese receipts - separate the territories so that you take receipts in the rest of the world and let the Chinese co-pro keep local receipts.
That way the Chinese co-production is simply about helping finance the making of the film rather than getting Chinese box-office.
The discussion of this makes me curious that perhaps this was the unspoken agreement with the 'Karate Kid' remake - the style and hero of the film made it unlikely it was going to be a big hit in China .. so perhaps Columbia Pictures did extremely well out of the deal.
In the case of 'Dragon Pearl' - collection is still a major issue. They had jump through many hoops just to get approval from the government just to transfer money between accounts. However they still have the problem that the money isn't appearing in the agreed account in the first place. The collection is still an issue with Dragon Pearl. Got approval to transfer between accounts from the government. The major problem is getting the money into the account in the first place. (Mind you - this is hardly a problem limited to that particular region - as Polksy Films has discovered.)
- People feel that the market is becoming more liberal - that China's internal markets are changing to be more similar to the rest of the world. But nothing could be further from the truth.
- Lawyers try to insert jurisdiction clauses into contracts - but that will doom any deal. Things may move a little beyond that .. but in the end the project will never go ahead if it has a contract with a jurisdiction clause outside of China.
- Arrogant attitude by Western companies are a real problem - they think that they've shot in Mexico so they can do the same thing in China. Even worse - what worked 3 years ago in China doesn't work now.
- In China contracts are largely a starting point for negotiation. Not an list of terms that they will abide by. To assume that contracts have the same meaning as they do in the west is a fundamental mistake that Western businesses make.
- In China there is no appreciation for how it is done in the west. They consider a Joint Venture as between two parties - they don't regard that the foreign partner may not have full control over their own end due to commitments needed for completion guarantees, etc.
You have to satisfy 5 different agendas:
- The approval process of the Chinese Government
- Your own project aims
- The needs of the Chinese Market
- The needs of the Australian Market
- The needs of the International Market
The conventional approach of spending 6 months writing the screenplay and presenting it means that you end up with square pegs into round holes.
1. Agree on finance with the Chinese partner first - based on story only. There is no point in spending resources into developing a script that is going to need to change fundamentally for cultural reasons. (eg: The doomed High School Musical experience)
2: Get your Government involved as soon as possible - you want the Minister of Trade behind you for some weight at early meetings - perhaps via schemes like Australia Unlimited.
3. Be prepared to write off the entire of Chinese Box office.
Image Credit: Robin Hutton (CC Licensed)