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China Gallingly Seeks Greater Influence in Foreign Cultural Markets While Continuing to Severely Restrict Access to Its Own

China Gallingly Seeks Greater Influence in Foreign Cultural Markets While Continuing to Severely Restrict Access to Its Own

August 4, 2022

The Chinese government has recently released a policy paper announcing its intentions and strategies to “enhance national cultural soft power and Chinese cultural influence," including through increased investments in cultural industries, such as film and television in the United States and the European Union, “in a targeted manner.” This is especially rich given the draconian limits the Chinese government continues to place on foreigners’ access to such markets in China, including restrictions that contravene China’s World Trade Organization (WTO) obligations, compliance with which China has slow-walked since the very start of its WTO membership. Moreover, reciprocity represents a fundamental tenet of WTO membership. As China now seeks even-deeper influence in U.S. cultural industries, U.S. policymakers should adopt an approach insisting that Chinese enterprises be afforded no more rights or opportunities to participate in U.S. cultural and entertainment industries than to the extent China permits U.S. cultural and entertainment industries to participate in relevant Chinese markets.

As reported by Inside U.S. Trade, China’s new policy document, which was drafted by 27 Chinese departments, including the Ministry of Commerce, articulates China’s strategy for increasing its international competitiveness in cultural products and services and for “enhance[ing] national cultural soft power and Chinese cultural influence.” Yet even as it further seeks to expand its participation in foreign cultural industries, investments in foreign—mainly American—media by Chinese entities have already become commonplace. For instance, Tencent’s $3.3 billion purchase of a 10 percent stake in Universal Music Group made entertainment the U.S. industry receiving the most foreign direct investment (FDI) from China in 2020. Moreover, in its 2017 annual report to Congress, the U.S.-China Economic and Security Review Commission described the activity of Chinese firms in Hollywood—many of which, the report points out, have connections to the Chinese Communist Party (CCP)—as an “investment spree,” raising concerns that the CCP is gaining influence in the U.S. film industry, a major economic sector, and source of cultural influence.

Yet, against this backdrop stands the stark reality that the United States and other foreign enterprises are significantly restricted from investing in or participating in China’s entertainment industries. These restrictions often take the form of quotas, as with the film industry. For instance, as part of its accession to the WTO in 2001, the Chinese government agreed to allow the importation of 20 foreign films annually. China also committed to permitting U.S. firms to “form joint ventures to distribute videos, software entertainment, and sound recordings and to own and operate cinemas.” Yet China’s continuing failure to meet that standard led the United States to initiate a WTO dispute in 2009, which resulted in a WTO ruling finding that “many of China’s regulations on trading rights and distribution of films for theatrical release, DVDs, music, and books and journals were inconsistent with China’s WTO obligations.”

As part of a 2012 agreement to resolve the dispute, China agreed to raise the quota to 34 films, understanding that this level would be renegotiated in 2017. However, this issue became part of the Trump administration’s trade conflict with China, negotiations were canceled, and the quota remains at 34 foreign films per year. As the United States Trade Representative’s Office (USTR) explains, “As of March 2022, no agreement has been reached on the meaningful compensation that China owes to the United States.” Meanwhile, as USTR notes, to this day, China prohibits foreign companies from providing film production and distribution services in China, and China’s restrictions in the theatre services market have “wholly discouraged investment by foreign companies in cinemas in China.”

Elsewhere, China further restricts the online supply of foreign video and entertainment services through measures affecting content and distribution platforms. For instance, China mandates that foreign companies license their content to Chinese companies while also “imposing burdensome restrictions on content, which are implemented through exhaustive content review requirements based on vague and otherwise non-transparent criteria.”

As ITIF detailed in June 2020 Senate testimony on China’s “Censorship as a Non-Tariff Barrier to Trade,” China’s policies significantly harm a vibrant U.S. movie industry that in 2019 tallied exports of $16.3 billion (with a surplus of $9.4 billion) while directly supporting 892,000 jobs and another 1.6 million jobs indirectly. Before COVID-19 hit, China was on track to overtake the United States as the world’s largest movie market in 2020, with movie ticket sales in China more than tripling from 2011 to 2020. Indeed, China has become an important market delivering profits that support Hollywood’s blockbuster franchise offerings.

The problem is that as China’s own filmmakers get better (due partly to Chinese government support and protection), then U.S. content creators will have an even harder time competing for the limited attention and ticket spending they’re allowed. In 2019, China’s box office was dominated by local films—eight of the 10 top-grossing films were domestic movies—which is a worrying sign for Hollywood. This is why restricted market access, and calls to limit United States access in China, only speed the process by which China gains global market share at American enterprises’ expense.

Beyond the market dynamics at play lies the issue of China trying to exert soft-power, cultural, and geopolitical influence through its interventions in entertainment sectors. Restrictions like these—not to mention the leverage provided to the Chinese government through the sheer size of the Chinese market—give the CCP immense power to dictate the content produced by foreign media and to limit its accessibility within China. The CCP’s use of this power to promote its positions through entertainment and culture is no secret. In December 2017, a Chinese government official at the State Administration of Press, Publication, Radio, Film, and Television (now the National Radio and Television Administration) told industry representatives that movies should serve the purpose of “promoting the prosperity of socialist culture and realizing the Chinese dream” as defined by Xi Jinping Thought.

Specific examples of the Chinese government wielding this power abound. Last year, Fast & Furious 9 star John Cena was forced to issue an apology to Chinese audiences for referring to Taiwan as a country in an interview while promoting the film. (Fast & Furious 9 was one of the 34 foreign films screened in China last year.) In October of last year, the Ministry of Culture and Tourism announced a ban on karaoke songs with “illegal content,” which includes songs that “endanger national unity, sovereignty or territorial integrity.” As a final example, Marvel Studios invited Chinese officials to visit the set of Iron Man III and advise them during filming so as to maximize the film’s chances of getting past the censors in Beijing.

Of course, this is not to lay blame at the feet of U.S. movie studios. As mentioned above, the CCP’s massive leverage heavily skews the power dynamic, and Hollywood is more or less forced to play along. Moreover, it is still a net benefit to have more top-grossing movies screened in China than not, as the revenues support domestic jobs, and the screenings facilitate a greater exportation of Western culture than would otherwise exist. Thus, the asymmetries in market access and foreign influence are cause for concern, and increasing such asymmetries deserves immediate discussion.

As part of its policy announcement, the Chinese government said it would “explore” easing the restrictions on foreign cultural and entertainment firms and their hindered access to the Chinese market. While that might sound promising, as ITIF has comprehensively documented, China exhibits a long track record of failing to comply with a wide variety of its WTO commitments. Moreover, as the examples above and President Xi Jinping’s emphasis on the state’s influence in cultural matters suggest, control over the content the Chinese people are exposed to is not something the CCP is likely to relinquish.

Proponents of China’s accession to the WTO argued that increased trade and economic integration would show the Chinese people the benefits of liberalism and market economies and that, as a result, they would demand such things for themselves. Put another way, by opening up trade with China; the West would export its socioeconomic values and bring China into the liberal, democratic international order. However, as The Economist described, two decades after China’s WTO accession, “the illusion has been shattered.” Xi Jinping’s tenure as head of the CCP has reinvigorated authoritarian, nationalist, and conservative values in Beijing, which the Chinese government is increasingly better poised to export to the rest of the world. Integration was supposed to promote Western political and economic values in China implicitly. However, with China’s growing investments in Western media and the egregious lack of reciprocity concerning market access and the policing of content, the opposite case is looking more and more likely by the day.

In conclusion, U.S. policymakers must insist that China comply with its WTO commitments in cultural and entertainment industries and, more broadly, adopt an approach that Chinese enterprises are permitted no more access to U.S. cultural and entertainment markets than U.S. companies receive in China.

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