Sluggish Recovery Post COVID for Chinese Film Industry

June was a big month for the Chinese movie industry, with the glitzy Shanghai International Film Festival proclaiming a rebound for the industry post-COVID. Meanwhile, Hong Kong’s Fresh Wave International Film Festival sounded a more sobering note as organizers not-so-subtly highlighted Chinese Communist Party (CCP) censorship. The two festivals provided a perspective on a movie industry that has not roared back as expected when China dropped its zero COVID measures late last year. A surge in ticket sales during the January Lunar New Year—shortly after China dropped zero-COVID restrictions—got the year off to a promising start. However, China’s 5-day Labor Day holiday in early May, which usually provides a boost to the movie industry, proved disappointing, with state media Sixth Tone reporting that theaters were half-full or empty, and ticket sales lower than they were in the previous two years. Chinese media reported optimistically about box office revenues but the data reflected higher ticket prices. Experts say the underwhelming recovery reflects China’s overall economic woes. A deeper reason, they say, is censorship and a climate of fear. Film Festivals: Glitz and Censorship The Shanghai International Film Festival, which ended June 18, marked its 25th year with fanfare, as well as a clear focus on China and its initiatives, with the international portion of the festival giving priority to offerings from Belt and Road countries. Russian films were promoted, and the festival hosted its first sci-fi week. Meanwhile, at Hong Kong’s 17th Fresh Wave film festival, which kicked off June 9 and continues until July 2, movie themes were personal and resonated with a city suffering under the heavy hand of the CCP. Many families have been splintered as people flee Hong Kong, and the memory of the 2019 protests is still freshly painful, as is COVID-19. Many of the films “subtly reflected recent traumas,” said the Wall Street Journal. Some of the festival’s movies featured blacked-out images and muted sound in portions: “This is NOT a technical error,” said festival organizers, but was done deliberately after censors demanded certain scenes be cut. Slow Recovery From COVID Despite the pomp and circumstance, it’s clear that China’s continued economic slowdown has affected the film industry’s recovery. Box office revenues in the first half of 2023 only reached 2016 levels. Analysts believe China’s high unemployment and debt levels have made people more cautious about spending on entertainment. According to Chinese news site Caixin Media, China’s box office revenue through June 15 was about 23.3 billion yuan ($3.3 billion). That puts it at around the same level as box office revenues from the first half of 2016—7 years ago—which totaled 24.3 billion yuan ($3.6 billion at the time). Further, this year’s box office revenues were only 36.8 percent of China’s total box office revenues for 2019, which totaled 64.3 billion yuan ($9.3 billion at the time). Reflecting national box office trends, the performance of many film industry companies has recovered somewhat this year, but the recovery is slower than expected. For example, China Film Co., Ltd. reported that its operating income for the first quarter of 2023 was 1.5 billion yuan (about $202 million). That marked a year-on-year increase from 2022’s 946 million yuan (about $141 million last year). But compared to the first quarter of 2019, when it made 2.2 billion yuan (about $323 million) it was a decrease of almost 35 percent. In short, although China Film’s performance improved significantly in the first quarter of this year, reaching about 53 percent, there is still a significant gap between this year’s financials and its situation pre-COVID. Moviegoers at the Wanda Group’s Oriental Movie Metropolis movie theater in Qingdao City, Shandong Province on April 27, 2018. (Wang Zhao/AFP/Getty Images) In an economic slump, it helps to be state-owned—at least temporarily. China Film’s top five owners are all state-owned enterprises, with the largest holding being China Film Group Corporation, which owns more than 67 percent. Although the Chinese economy is struggling overall, state ownership gives China Films—as a central enterprise of the Chinese Communist Party (CCP)—access to resources and padding against risk that other film companies do not have, according to a May report by Capital Securities. According to Sina Finance’s Chinese film industry ranking, China Film’s main business ranks second in the industry after private enterprise Wanda Film Holding Co., Ltd.  Nonetheless, in the first quarter of 2023, Wanda Film reported less than one-sixth of China Film’s first-quarter revenue growth, at 8.6 percent year-on-year. Art Imitates Life The slow recovery of the film industry mirrors the continuing downturn of the Chinese economy. “High unemployment and high debt have contributed to a slow recovery in recreational spending,” Japan-based political comm

Sluggish Recovery Post COVID for Chinese Film Industry

June was a big month for the Chinese movie industry, with the glitzy Shanghai International Film Festival proclaiming a rebound for the industry post-COVID. Meanwhile, Hong Kong’s Fresh Wave International Film Festival sounded a more sobering note as organizers not-so-subtly highlighted Chinese Communist Party (CCP) censorship.

The two festivals provided a perspective on a movie industry that has not roared back as expected when China dropped its zero COVID measures late last year.

A surge in ticket sales during the January Lunar New Year—shortly after China dropped zero-COVID restrictions—got the year off to a promising start.

However, China’s 5-day Labor Day holiday in early May, which usually provides a boost to the movie industry, proved disappointing, with state media Sixth Tone reporting that theaters were half-full or empty, and ticket sales lower than they were in the previous two years. Chinese media reported optimistically about box office revenues but the data reflected higher ticket prices.

Experts say the underwhelming recovery reflects China’s overall economic woes. A deeper reason, they say, is censorship and a climate of fear.

Film Festivals: Glitz and Censorship

The Shanghai International Film Festival, which ended June 18, marked its 25th year with fanfare, as well as a clear focus on China and its initiatives, with the international portion of the festival giving priority to offerings from Belt and Road countries. Russian films were promoted, and the festival hosted its first sci-fi week.

Meanwhile, at Hong Kong’s 17th Fresh Wave film festival, which kicked off June 9 and continues until July 2, movie themes were personal and resonated with a city suffering under the heavy hand of the CCP. Many families have been splintered as people flee Hong Kong, and the memory of the 2019 protests is still freshly painful, as is COVID-19.

Many of the films “subtly reflected recent traumas,” said the Wall Street Journal. Some of the festival’s movies featured blacked-out images and muted sound in portions: “This is NOT a technical error,” said festival organizers, but was done deliberately after censors demanded certain scenes be cut.

Slow Recovery From COVID

Despite the pomp and circumstance, it’s clear that China’s continued economic slowdown has affected the film industry’s recovery. Box office revenues in the first half of 2023 only reached 2016 levels. Analysts believe China’s high unemployment and debt levels have made people more cautious about spending on entertainment.

According to Chinese news site Caixin Media, China’s box office revenue through June 15 was about 23.3 billion yuan ($3.3 billion). That puts it at around the same level as box office revenues from the first half of 2016—7 years ago—which totaled 24.3 billion yuan ($3.6 billion at the time).

Further, this year’s box office revenues were only 36.8 percent of China’s total box office revenues for 2019, which totaled 64.3 billion yuan ($9.3 billion at the time).

Reflecting national box office trends, the performance of many film industry companies has recovered somewhat this year, but the recovery is slower than expected.

For example, China Film Co., Ltd. reported that its operating income for the first quarter of 2023 was 1.5 billion yuan (about $202 million).

That marked a year-on-year increase from 2022’s 946 million yuan (about $141 million last year). But compared to the first quarter of 2019, when it made 2.2 billion yuan (about $323 million) it was a decrease of almost 35 percent.

In short, although China Film’s performance improved significantly in the first quarter of this year, reaching about 53 percent, there is still a significant gap between this year’s financials and its situation pre-COVID.

Epoch Times Photo
Moviegoers at the Wanda Group’s Oriental Movie Metropolis movie theater in Qingdao City, Shandong Province on April 27, 2018. (Wang Zhao/AFP/Getty Images)

In an economic slump, it helps to be state-owned—at least temporarily.

China Film’s top five owners are all state-owned enterprises, with the largest holding being China Film Group Corporation, which owns more than 67 percent.

Although the Chinese economy is struggling overall, state ownership gives China Films—as a central enterprise of the Chinese Communist Party (CCP)—access to resources and padding against risk that other film companies do not have, according to a May report by Capital Securities.

According to Sina Finance’s Chinese film industry ranking, China Film’s main business ranks second in the industry after private enterprise Wanda Film Holding Co., Ltd.  Nonetheless, in the first quarter of 2023, Wanda Film reported less than one-sixth of China Film’s first-quarter revenue growth, at 8.6 percent year-on-year.

Art Imitates Life

The slow recovery of the film industry mirrors the continuing downturn of the Chinese economy.

“High unemployment and high debt have contributed to a slow recovery in recreational spending,” Japan-based political commentator Qu Kai told The Epoch Times on June 18.

According to the May economic data published by China’s National Bureau of Statistics, the total retail sales of consumer goods in May increased by 12.7 percent year-on-year, 5.6 percentage points lower than that in April. In the first five months of 2023, the national fixed asset investment grew by 4.0 percent year-on-year, 0.7 percentage points lower than the growth rate in the first four months. As both investment and consumption growth slowed, the unemployment rate for young people aged 16-24 rose to a record high of 20.8 percent.

Epoch Times Photo
People attend a job fair in Huaian, in China’s eastern Jiangsu province on May 26, 2023. (STR/AFP via Getty Images)

“Where will consumption come from if people’s income does not increase?” Li Yang, president of China’s National Institute for Finance & Development, raised the issue at the Changbai Mountain Summit Forum on Feb. 4.

“The debt of Chinese residents is too high,” Li said. “China’s debt problem is a headache.” He explained that “For every 100 yuan [about $14] earned, 15 yuan [about $2.10] is needed to repay one’s debts.”

As an extreme example, Li cited China’s ‘mortgage slaves,’ who may pay 50 percent of their income on housing debt.

Along with the bottleneck in consumer spending, investment in China’s film industry is shrinking, and the reasons are not merely economic, say industry experts.

The industry is losing investors because the current policy on film content limits content producers, Wang Changtian, chairman of Enlight Media, said at the opening forum of the Shanghai International Film Festival on June 10.

Hong Kong’s Climate of Fear

Hong Kong’s film market is at a low ebb. The city produced only about 30 new films in 2022, a shadow of its past, which at one point saw more than 200 films produced in a year, said Hong Kong director and screenwriter Jia Shengfeng during the festival.

Epoch Times Photo
A woman looks at movie advertisements at a cinema in Hong Kong on Sept. 2, 2021. (Isaac Lawrence/AFP via Getty Images)

One obvious reason is “brain drain”—the flight of top talent to the West. For those who remain behind and stay in the industry, film production is a delicate balancing act.

An example of this is filmmaker Kiwi Chow, whose documentary on the 2019 protest movement, “Revolution of Our Times,” premiered at Cannes in 2021 but was banned in Hong Kong. Subsequently, he was unable to find a production company to sponsor his new movie, “Say I Do To Me,” which has nothing to do with politics.

Chow told attendees at a film festival in London in March that he has faced barriers to funding, difficulty hiring actors and booking locations, with venues asking for assurance that the movie “won’t violate the national security law.”

“Hong Kong’s film [industry], as China’s overseas market, is a good case of infiltration and united front. To accept Chinese capital, you must accept China’s political requirements,” Qu Kai said.