China woos Hollywood studios with film fund

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By RYAN NAKASHIMA, Associated Press

LOS ANGELES (AP) — China extended its courtship of Hollywood on Wednesday, with government officials touting a new fund for co-financing movies.

The push comes just weeks after China's leader-in-waiting, Vice President Xi Jinping, unveiled rules that would give foreign films better access to its booming box office and a larger percentage of ticket receipts.

China is looking to learn from Hollywood and develop the ability to make commercially successful movies on par with the biggest blockbusters. U.S. studios are trying to break further into China, where box office receipts rose more than a third last year to $2 billion. That puts it on pace to become the world's 2nd largest movie market in a few years, expected to top $5 billion by 2015.

Meanwhile, North American theater revenue has fallen for two years straight, and ended the year with $10.2 billion in ticket sales. With attendance falling and DVD sales continuing to slump, China represents one of the most attractive growth opportunities for the U.S. movie industry.

Yang Buting, former chairman of one China's two national movie distributors, China Film Group, said that China wants to help make movies that appeal to both Chinese and global audiences while developing its fledgling movie-making industry.

"China boasts a long history and a rich culture," Yang told attendees at a film finance conference in Los Angeles. "But we must see that compared with the American film industry, we still have a long way to go in terms of screenwriting, production, marketing and distribution."

For the last decade, China has allowed only 20 foreign films a year — mostly big-budget Hollywood fare — to get national distribution in a tightly controlled system that limits the foreign share of ticket sales to a range from 13.5 percent to 17.5 percent.

The U.S. had pressed for further easing of the rules since 2007 and a state visit last month by Xi led to a breakthrough. Under the new rules, China will allow in up to 14 more foreign films a year as long as they are made in 3-D or for the big-screen Imax format, and raise the share of ticket sales to 25 percent.

China is also encouraging joint ventures where Chinese companies have a majority stake.

Films co-produced in such ventures can evade the quota system and get a higher share of ticket sales — up to 43 percent of all box office receipts, Yang said in an interview after his presentation.

Several tie-ups have been announced over the last year, including one announced last month that will give "Kung Fu Panda" maker DreamWorks Animation SKG Inc. a 45 percent stake in a Shanghai-based studio with three Chinese companies. That venture is expected to begin operation later this year.

Yang declined to say how much money would be in the fund, called the China Mainstream Media National Film Capital Hollywood Group Inc. He simply said the amount would be "adequate" to co-finance films made at the Hollywood studio level.

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