China agreed on Friday to open its market to more American movies, in a dramatic Hollywood ending to a week-long visit by China’s leader-in-waiting that produced billions of dollars in business deals.
“This agreement with China will make it easier than ever before for U.S. studios and independent filmmakers to reach the fast-growing Chinese audience, supporting thousands of American jobs in and around the film industry,” Vice President Joe Biden said in a statement.
U.S. Trade Representative Ron Kirk, whose office pursued the agreement as Chinese Vice President Xi Jinping traveled across the United States, said the pact would boost “one of America’s strongest export sectors in one of our largest export markets.”
The agreement came during Xi’s stop in Los Angeles on the last leg of a visit that began in Washington and went through U.S. farm country in Iowa.
It does not require China to lift its annual quota of 20 foreign films per year, but essentially expands it through other concessions that pleased Hollywood.
Beijing will permit 14 premium format films, such as IMAX or 3D, which will be exempt from the quota, as will the 2D versions of the films, a U.S. trade official said.
The Chinese box office share for U.S. studios also will increase under the master contract to 25 percent from around 13.5 percent to 17.5 percent, the official said.
“This is a major step forward in spurring the growth of U.S. exports to China,” Chris Dodd, president of the Motion Picture Association of America (MPAA), said. “It is tremendous news for the millions of American workers and businesses whose jobs depend on the entertainment industry.”
Walt Disney [DIS 41.75 0.21 (+0.51%) ] President and Chief Executive Robert A. Iger said the deal would help U.S. movie makers grab a bigger piece of the action in one of the fastest-growing film markets in the world.
Chinese box office revenue grew to $2.1 billion last year, with much of that coming from 3D titles, a rapidly growing sector of the film industry.
“This agreement represents a significant opportunity to provide Chinese audiences increased access to our films,” Iger said.
The U.S. movie industry has long complained about China’s tight restrictions on foreign films, which they say helps fuel demand for pirated DVDs that are widely available in China.
The agreement announced on Friday grew out of a case challenging China’s restrictions on importation and distribution of copyright-protected materials won by the United States at the World Trade Organization in 2009.
China subsequently took steps to improve market access for books, newspapers, journals, DVDs and music, but the two sides continued to haggle over films.
The pact strengthens opportunities to distribute films in China through private enterprises rather than the state film monopoly, and ensures fairer compensation levels for U.S. films distributed by Chinese state-owned enterprises, Kirk’s office said.
It allows any Chinese enterprise to be granted a license to distribute imported films and contains a “robust set of safeguard mechanisms” for U.S. enterprises, including audit rights, a U.S. trade official said.
The pact will be reviewed after 5 years to ensure that it is working as envisioned.
Xi, who is poised to become China’s president next year, left a stream of business deals behind on his get-acquainted tour of the United States.
Those included “Kung Fu Panda” studio Dreamworks Animation‘s [DWA 19.52 0.18 (+0.93%) ] venture to make films from Shanghai, and Chinese telecom giant Huwei’s pledge to award $6 billion in contracts over three years to Qualcomm [QCOM 62.52 0.25 (+0.4%) ], Broadcom [BRCM 37.66 -0.49 (-1.28%) ] and Avago [AVGO 35.24 -0.62 (-1.73%) ].
The Chinese trade delegation this week also inked deals to buy a record 13.4 million tons of U.S. soybeans, valued at $6.7 billion.