Free-trade accord spurs investment
China's trade agreement loosens import rules
The free-trade agreement with China, which was introduced about a year ago and put into effect Jan. 1, loosens import requirements for Hong Kong films, namely Chinese-language films produced in the territory can bypass China's quota of 20 foreign films a year. Hong Kong films also escape tariffs by essentially being considered local by the mainland.
"Realistically, it doesn't make a big difference," says Katherine Lee, senior veep of distribution for Filmko Films, which does three to four films a year, many of them co-productions with China. "Cepa is operational, it's a way of doing things."
Jeffrey Chan, head of distribution and sales for Media Asia, agrees with Lee that there isn't much difference, but "the rules are more flexible, so that helps." Media Asia tries to organize a co-production for every one of its six to 10 pics a year.
But co-productions aren't inherent just to Cepa; Hong Kong companies were already cooperating with China before the agreement hit the books. Now they 're just doing more.
An estimated 140 Hong Kong movies are expected to enter the mainland market this year, about a 70% jump from a year ago, Raymond Chow, chairman of the Hong Kong Trade Development Council's Entertainment Industry Advisory Committee, said at a pre-Filmart press conference in early June. Film co-productions also were expected to hit 100, compared with last year's 40, he said at that time.
However, Woody Tsung, chief exec of the Hong Kong Motion Picture Industry Assn., says most of the films released in the first half of 2004 were set to go prior to Cepa -- and that even if they were co-productions, which a lot of them were, they didn't necessarily use the trade agreement.
In addition, Lee argues that whether you make a film and where the budget is set is market driven. With or without Cepa, a film has to make sense from a financial perspective, he emphasizes.
There is still a lot of potential, Tsung says, but most in the industry agree it will take a couple of years for some of the kinks to be worked out.
Those issues include increased competition for theatrical release dates, which is exacerbated by a still-developing infrastructure; falling prices of videos; and only two buyers with rights to import films -- China Film and Huaxia.
Cinema investment
With a boost in the number of films being released on the mainland, some companies have turned their attention to building up the infrastructure by investing in theaters.
Warner Bros. has reportedly agreed to open 10 multiplex cinemas in China with Guangzhou Jinyi Film and Television Investment. Edko Films, Intercontinental Group Holdings and Mandarin Entertainment Holdings have also discussed opening theaters.
Universe Entertainment is in that group as well but has backed off of its original plan to open one or two theaters in Guangdong Province in southern China by 2005.
Once Cepa was up and running, Universe looked at opening theaters as soon as possible, "but the risks aren't as simple or measurable as we originally expected," says Alvin Lam, chief operating officer.
One concern is that the China market has slowed down since the company first began considering the investment. The company now plans to spend more time finding the right location and is aiming to open about five theaters in the next five years, Lam says.
In the meantime, Universe will focus on film and TV series production.
The company originally aimed to release 12 to 15 pics this year, but has downgraded to eight, which is its goal for next year along with bigger budgets. A majority of them will be co-productions -- unless the storylines don't make the cut with China's censors.
