Starting in 1994, China, which boasts the world’s second-largest (and growing) box office market after North America, allowed ten foreign films a year into the country on a revenue-sharing basis. But in 2001, China acceded to the World Trade Organization (WTO), which made it easier for foreign investment to enter China and opened the door for joint investment and movie coproduction. At around the same time, China increased its annual foreign film quota from ten to twenty.
For China and the United States, this new scenario represented a complex opportunity. Not only did the United States gain access to the large and lucrative Chinese market but also with the advent of movie coproduction, U.S. films could circumvent the quota system and bring in greater shares of revenue. China, wary of a Hollywood invasion, was not immediately sold on the idea of opening its market. But the Chinese ultimately saw coproduction as a way to increase the country’s international influence through culture, believing that this new relationship would spur investments in the Chinese economy, increase tourism, and present the country in a flattering light.
The transition was not seamless. In 2007, the United States filed a complaint with the WTO, which ruled that China’s enduring import restrictions violated its WTO obligations.