China’s film industry shoots for post-Covid recovery

After spending six years and HK$450mn (US$58mn) on science fiction epic Warriors of Future, Hong Kong film star and avowed Star Wars fan Louis Koo hoped it would capture the imaginations of China’s millions of cinemagoers.

But the film, about the battle to save a post-apocalyptic Earth from an invasive alien plant, grossed a lukewarm Rmb679mn ($100mn) on the mainland, failing to crack the box office top 10 last year.

“The pandemic has changed [the film industry] a lot, including how we evaluate when is the best time to release a film in which market and how it will potentially perform,” Koo, who produced and starred in the film, said. “We are of course hoping for a quick recovery.”

The question for producers such as Koo, both domestically and in Hollywood, is whether the end of Covid restrictions will encourage one of the world’s biggest film audiences to return to the cinema. Declining financing, censorship and changing tastes could all scupper the industry’s hopes of a strong recovery after three years of lockdowns shut theatres across the country.

Chinese box office receipts tumbled more than a third from Rmb47bn in 2021 to Rmb30bn in 2022, according to ticketing platform Maoyan, relinquishing the crown to the US for the first time since surpassing it in 2020. For 2023, China’s box office has surpassed Rmb5bn as of Wednesday, outpacing North America’s $486mn, according to data from Maoyan and Amazon’s Box Office Mojo.

Even as China sheds Covid restrictions, film producers and industry analysts remain cautious about this year’s outlook, as shifting audience preferences and tighter import controls threaten the dominance of foreign blockbusters, previously the highest revenue generators in the market.

Disney’s much-anticipated Avatar: The Way of Water could be a harbinger of difficult days to come for Hollywood in China. The sequel to the highest-grossing film ever, it was one of last year’s biggest foreign releases in China, grossing Rmb1.6bn since its release in mid-December. But that was less than half of the takings for the year’s top earner, The Battle at Lake Changjin II, a patriotic reimagining of the Korean war whose first instalment was commissioned by the Chinese Communist party’s propaganda arm.

“Avatar underperformed compared to early expectations,” said Chris Fenton, a US-China analyst and former president of DMG Entertainment Motion Picture Group. A “good part of that was due to Covid”, he added, with many movie-goers staying home as infections surged across the country at the end of 2022.

China’s cinema screens are undergoing a major shift in favour of domestic titles. Only 59 foreign films were approved to be screened in China last year, down from 73 in 2021 and 136 in 2019, according to Alibaba’s movie ticketing platform Taopiaopiao, and just two non-Chinese films — Avatar and Jurassic World Dominion — cracked the top 10 in revenue in 2022.

Two Marvel films, which are also produced by Disney, have been approved to screen in China next month, the first since 2019, and the top seven titles released during the lunar new year this month, traditionally a boom period for the film industry, are domestic productions.

For domestic productions, pandemic curbs on movement delayed filming and increased costs, limiting potential returns for investors. Domestic and international investment in China’s film and television industry fell to Rmb4.6bn in 2021 from a peak of Rmb27bn in 2017, according to iiMedia Research.

“There was a lot of optimism in 2021 . . . when we thought we were heading back to pre-pandemic levels,” said David Chen, a Hangzhou-based film producer with studio Versatile Media. “But [after the Shanghai lockdown from March to May] people couldn’t secure financing anymore and had to cancel projects.”

In 2022, at least 13,910 out of 14,124 cinemas across the country were temporarily shut due to Covid, according to Beijing-based consultancy Top Century. Some never reopened.

Censorship also remains a “moving target” for skittish investors, analysts said. Aynne Kokas, director of the East Asia Center at the University of Virginia, said one “big challenge” for mainland filmmakers is that “the timescale for film production is much slower than censorship”.

“[The] lines for what is acceptable and unacceptable content are moving at a much faster pace than the film production process,” she said.

In August, Chinese censors altered the ending of the animated feature Minions: The Rise of Gru for its domestic release, so that one of the villains is sentenced to 20 years in prison, while the other settles down and has a family. In the original, the duo successfully evade arrest.

Given the massive size of its domestic market, some remain hopeful that China’s box office will bounce back after Beijing began hastily rolling back its zero-Covid regime last month.

“The Chinese film market still has strong spending power,” said Kenny Ng, a film scholar at Hong Kong Baptist University. “We must first wait for the [pandemic] in the mainland to get under control . . . then a full-scale economic recovery can be moving effectively.”

Audience preferences will remain the decisive factor in the fight for China’s cinema screens.

“China will regain the box office throne ,” said Fenton, the former film executive. “But box office grosses [will come] from Chinese domestic films, not Hollywood films.”