The saying that "China's WTO entry will bring about both challenges and opportunities" might be inapplicable in the film industry because challenges will be far greater than opportunities in this industry.

In the late 20th century, the eight major filmmaking companies in Hollywood undertook industrial adjustments and reorganizations and formed some larger industrial groups. In 1995, American films took 75% of European ticket revenues; at the end of the 20th century, American films reaped US$7.5 billion at the domestic ticket revenues and at the same got more than US$6 billion from overseas film market. The film industry has become an important part of the economy in the US.

The Hollywood film industry features advantages of capital, technology, development capacity and marketing ability, which are far beyond the reach of China's film industry. In China there are three big studios - the Shanghai Film Studio, the Beijing Film Studio and the Changchun Film Studio, 16 provincial studios and some others, which, even if they are all placed together, cannot match any of the eight Hollywood companies. Film enterprises in China feature both small scale and low profitability; most importantly, they haven't formed industrialized production and the distribution mode. In 1999, China released more than 100 domestic and imported films, which turned out to a gross less than US$100 million at the box office, only about 1.5% of the figure in the US domestic market.

On November 15, 1999, China signed the bilateral agreement with the United States on China's accession to the WTO. In the agreement, China promised to allow foreign investors to set up sound- and video-recording companies with foreign shares up to 49% within one year after China's accession to the WTO; it promised to allow joint ventures with foreign shares higher than 50% to set up and renovate cinemas and theatres within three years. Prior to the agreement, China permitted a maximum of 10 foreign films. Under the agreement, China will increase imports to 40 films in the first year, and 50 by the third year of which 20 will be on a revenue-sharing basis.

With China's WTO entry imminent, Hollywood film moguls are eagerly awaiting changes Hollywood has regarded the untapped film market in China as an undeveloped diamond mine.

China's opening up its film market does not simply mean increasing demand for showing and stereo systems, which will make China a new export market for the United States. Western countries also predict that China perhaps will overtake Europe (US$4.4 billion annually at ticket revenues) and Japan (US$1.6 billion) and become the world's No.2 film market only after the United States.

In order to explore the Chinese film market, major Hollywood film studios have begun to study the Chinese market since the mid-1990s, and some have set up representative offices in China and hired overseas Chinese students to take important positions in their offices. A lot of foreign film studios even actively sought contacts with government departments in charge of film and ideology in China.

Hollywood vs. Feng Xiaogang

Hollywood films certainly pose a threat to Chinese domestic films, but they are impossible to and should not take the place of China-made films, which embody Chinese people's heart-felt caring for the reality, culture and experiences in their motherland.

Different from western developed countries, China is going through the transition from a traditional society to a modern society. Any the transition period is the golden time for domestic films. Chinese films can more directly go deep into filmgoers' heart than Hollywood films because domestic films better reflect the reality known to Chinese filmgoers.

It is not appropriate to say that Chinese films do not have vital force. For instance, films directed by Feng Xiaogang ranked among the world top offices nearly every year in recent years. This shows that Chinese films have their own market, which is far larger than the market for New Year celebration films, and the key to expand the market is to produce films oriented to the market as Feng Xiaogang did.

At the end of the 20th century, western cultures entered a relatively stagnant state, providing a good opportunity for us. In the shake-up, cultures of different races beyond the mainstay of European culture will serve to supplement western cultures. Hiding Dragon and Crouching Tiger is a typical example for this. The film did not win high acclaim in Asia but received an unprecedented welcome in Europe and America, showing that the film makes up certain elements short in western cultures. 

American films are plagued with the problem of increasing cost. The production cost of each film reaches US$70 million on the average and, together with promotion expending, the cost is approaching US$100 million. While China's film production cost stands at RMB3 to 4 million, enjoying a big advantage. In addition, the emergence of digitalized technologies in recent years made Hollywood films more similar to computer games. As a result, these films possess fewer elements of human nature and sensibility. This means a good opportunity for Chinese films to present new value judgment and sensibilities to the world.

The import of 20 films is not fateful.

The US film market can hold 400 to 500 films in a year. China's film market cannot run smoothly until the number of commercial films in its market reaches at least 100 to 200 every year. Two thirds of the 200 films are in fact supplementary films but not blockbusters; if Hollywood films take up 50, then more than half of the box office will be taken by Hollywood. Now, China promised to import 20 foreign films per year on a revenue-sharing basis. This will not deal a fatal blow to Chinese films if we can produce our own films tailored to the market.

Hollywood invited quite a few Chinese stars, directors and cameramen, which on the one hand supplemented their cultures and, on the other hand, laid the foundation for their films to enter the Asia-Pacific Region. In the future, they will by all means hire Chinese with their capital to produce Chinese localized films. Perhaps at first, they can only produce some "bogus Hollywood" films not completely to American taste; with the increasing market development, Chinese culture will get closer to western cultures and Chinese films will change along with the change of society. As a result, films produced in China might become real "American films". This is an austere crisis latent in China's film industry.