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Why China Is Hoarding Hollywood’s Box-Office Profits

A Wanda cinema in Fuzhou, in southeast China’s Fujian province, in 2012
A Wanda cinema in Fuzhou, in southeast China’s Fujian province, in 2012Photograph by Imaginechina/Corbis

As Hollywood movies have raked in hundreds of millions of dollars playing in Chinese theaters in 2013, the films’ studios have apparently enjoyed none of the profits. A state-owned distributor, China Film Group, is refusing to share any box-office payments, according to the Hollywood Reporter, over a disagreement involving a new 2 percent tax increase that China has leveled at U.S. film studios.

In a World Trade Organization agreement between China and the U.S. last year, China said it would pay foreign film studios 25 percent of their box-office revenue, up from the 13 percent to 17 percent range in the previous agreement. China Film Group initially said no additional fees or taxes would come out of that 25 precent, but for reasons that are unclear it changed its mind and introduced an additional levy on all box-office payments. Hollywood studios have so far refused to pay up because, they say, the new tax wasn’t part of the WTO agreement. As a result, China has been holding box-office payments hostage in what’s been a silent international standoff that has stretched on for months.