China's recent announcement that it will reduce the import of American films marks a significant escalation in the ongoing trade tensions between the world's two largest economies. This move extends the trade conflict beyond traditional sectors like manufacturing, minerals and agriculture into the realm of cultural exchange and entertainment—a domain where American influence has historically been strong. However, it comes at a time when China is increasingly seeking to project its ‘soft power’ and champion the success of its domestic film market, meaning that the film import restriction will play a part in a larger geopolitical and cultural shift.
Market Impact and Strategic Significance
The Chinese film market has over the years become crucial to Hollywood's global strategy, representing as it does the world's second-largest box office territory with over 90,000 screens and a potential audience exceeding one billion moviegoers. In 2024, China's total box office reached 42.5 billion yuan (approximately $6.5 billion), making it a significant revenue source for American studios, even as the Chinese cinema market struggled to recover after the pandemic.
"China has become an indispensable part of the global box office system. It is no longer an option, but a must," states Comscore’s Paul Dergarabedian quoted in CCTV News. This assessment is supported by box office data showing major Hollywood franchises earning billions in the Chinese market, with the Transformers series generating 4.17 billion yuan (USD $571.8 million), the Avengers series 8.67 billion yuan (USD $1.19 billion), and the Fast and Furious series 9.6 billion yuan (USD $1.31 billion) in mainland China.
The Hollywood Reporter has bluntly acknowledged this dependency, noting that "China is not only a boost to the box office, it can even determine whether a blockbuster is profitable or loss-making".
Beyond Box Office: The Broader Economic Ecosystem
The impact of restricted market access for Hollywood films extends far beyond ticket sales. It affects the entire commercial ecosystem built around popular entertainment properties, including merchandise, theme parks, and licensing agreements.
American entertainment companies have made significant infrastructure investments in China. Universal Studios Beijing generated revenue accounting for 16.5% of its global total in 2024, making it the company's third-largest revenue source globally. Shanghai Disneyland saw attendance increase by 164% in 2023 as pandemic restrictions eased.
IMAX CEO Richard Gelfond emphasised this strategic importance, saying, "If you talk about the future of global movies without mentioning China, you are missing the most critical piece of the puzzle." IMAX has carefully been cultivating the Chinese market, by not just rolling out its large format screens, but also persuading Chinese filmmakers to use its special cameras and post-production tools.
Changing Market Dynamics
The Chinese film industry has grown rapidly in the past decade and in the process gradually reducing its reliance on Hollywood content. In 2024, domestic films claimed nearly 80% of the mainland Chinese box office. Chinese-produced films have achieved remarkable success, exemplified by "Ne Zha 2: The Devil Boy Conquers the Dragon King," (above) which generated over 15 billion yuan (over two billion dollars), ranking fifth in global box office history and the highest-grossing animated title of all time globally.
Meanwhile, recent Hollywood releases have underperformed in China. "Captain America 4" earned just 104 million yuan (USD $14.2 million), while Disney's live-action "Snow White" generated only 9.27 million yuan (USD $1.27 million)—figures that pale in comparison to Hollywood's historical performance in the market.
Strategic Adaptation in Hollywood
American studios have responded to these market dynamics by developing strategic co-productions. Warner Bros. and China's Gravity Pictures collaborated on "The Meg" franchise, incorporating Chinese locations, talent, and cultural elements. This approach paid off with the first film earning over $150 million in China, more than any market outside the U.S., and the sequel performing even better in its Chinese debut than in North America.
CCTV reporter Liu Xiaoqian observed that "films that cater to Chinese cultural preferences and cooperate with Chinese actors, filming locations or producers usually get better distribution opportunities and market support." This has led to a situation where "Hollywood screenwriters and producers now even consider the feedback from the Chinese market during the script and casting stages."
Given that even before the latest restriction on the import of Hollywood films there was a cap on how many foreign (read: Hollywood) films could be distributed on a revenue share basis, working with Chinese co-producers was a way of getting around the earlier restriction and ensuring access to the market. It is worth remembering that several major Hollywood tentpole titles were denied a release in China altogether, including “Top Gun: Maverick” and Disney/Marvel’s “Doctor Strange”.
Financial Implications for Entertainment Companies
The stock market has already reacted to China's announcement, with major entertainment companies experiencing significant declines. Disney's stock fell 6.79% in a single day, while Warner Bros. Discovery dropped 12.53%. These movements reflect investor concerns about the potential long-term impact on revenue streams and growth prospects.
The U.S. media and entertainment sector, valued at $649 billion and projected to grow to $808 billion by 2028, relies heavily on international markets for expansion. For major entertainment companies and tech giants that have invested heavily in content, restricted access to the Chinese market threatens growth targets and return on investment. However, it is worth remembering that platforms such as Netflix are already barred from selling into China, highlighting that the Chinese communist party has always been restrictive about what Western media it permits in mainland China.
The Cultural Dimension
Beyond economics, China's decision represents a calculated use of cultural influence as a trade weapon. The State Administration of Film and Television has emphasised that China will "always adhere to a high level of opening up to the outside world," but clarified that this opening "is by no means a one-way dependence on a country's cultural products, but a two-way exchange based on equality and mutual benefit," quoted in Sina Finance.
This perspective frames China's action not as protectionism but as a response to U.S. trade policies that have "politicised cultural exchanges," according to an article in Sina Finance. Politics, economics and culture (including cultural values) are increasingly getting entangled on the global stage; whether it is Hollywood studios blocking the release of theatrical features in Russia following the wide-scale invasion of Ukraine while Russia in turn denounces Hollywood LGBTQ+ values, which also come to the forefront in terms of which films end up not being released in certain markets in the Middle East.
While Europe does not block any Hollywood films and does not appear to have any intention to do so, even here there is tension over issues such as the length of the release windows of films between their theatrical and streaming release. A large number of European countries are also pushing for a certain amount of revenue from the major US streamers to be taxed/collected and used to fund local productions.
Looking Forward
For the global film industry, these developments signal a potential long-term restructuring of international distribution strategies. American studios may need to reconsider budget allocations for blockbusters that have historically relied on Chinese revenues to achieve profitability. At the same time, they are doing without the revenue from the growing Russian market and face uncertainty even in the EMEA region.
Sina Finance offers a clear warning: "The plunge in the stock prices of American movies is just the first domino to fall... The booming Chinese film will not stagnate due to the reduction of American films, but if Hollywood loses China, it will lose the key battlefield that determines its future competitiveness." Nobody is expecting Hollywood to be de-throned from its leading position as the largest global exporter of films and television, but it would suffer a blow just as it has moved on from the pandemic and the strikes, and still faces the uncertainty of AI and competing online entertainment challengers.
The situation highlights how entertainment has become an unexpected but significant front in the trade war, with implications extending beyond immediate economic impacts to questions of cultural influence and soft power, whether for the US, China or other countries. For an industry built on storytelling, this may be one plot twist that Hollywood executives didn't see coming.
China's Hollywood Import Restrictions