Published by: World Tibet Network News ISSUE ID: 97/10/22

By Lynne O'Donnell

SHANGHAI, Oct 22 (Reuters) - China is slowly but surely opening up to foreign movie makers despite spats over Hollywood's current craze for Tibet, which is merely blurring an otherwise rosy outlook, industry sources said on Wednesday.

The dozen or so U.S. movies China allows in each year, while a tiny fraction of Hollywood's annual output, shows progress that U.S. companies hope may eventually lead to freer market access, said Ivan Cheah, senior vice president in Asia for Warner Brothers(TWX - news).

``We are trying to be patient and we have seen some significant progress in the last couple of years,'' Cheah said, speaking by telephone from Hong Kong.

China's film market remained strictly regulated by the central government, said an official of the organising committee of the Shanghai Film Festival, which opens on Friday.

Far from aiming to bring foreign films and distributors into China, the festival's task was to promote Chinese films to the world market, said the official, who requested anonymity.

``It will be a long time before the Chinese market is opened up any further because China wants to protect both its industry and its culture,'' the official told Reuters.

Beijing's fury over a recent crop of movies casting China in an unfavourable light was to be expected and did little more than underscore Hollywood's naivety about China, Shanghai-based film industry consultant William Brent said.

``China isn't the only country in the world trying to protect its film industry,'' said Brent, president of China Entertainment Network. ``It's just that it's a communist country trying to protect its film industry.

``The fact is that in the long run, China cannot ignore the Western film companies and they cannot ignore China, it is a mutually beneficial economic relationship, and it is just a matter of time before it matures,'' he said.

Three U.S. movies -- ``Seven Years in Tibet,'' ``Red Corner'' and ``Kundun'' -- recently earned Beijing's wrath because of their negative focus on policy towards Tibet and the legal system.

But on the eve of President Jiang Zemin's landmark trip to the United States, most industry sources said entertainment, while the second biggest U.S. export after aerospace, was not an essential component of the bilateral trade relationship.

``It (entertainment) doesn't receive the attention it deserves in terms of trade but it's not essential to China's development, like infrastructure or telecommunications,'' said an executive with a U.S. film distribution company who spoke on condition of anonymity.

Hollywood produces 500 to 600 films a year, earning $6 billion from exports, industry figures show.

Under a unique arrangement, foreign film companies must share their box office take with Beijing's monopolistic China Film, part of the Ministry of Radio, Film and Television.

Even though Chinese theatres charge among the world's highest ticket prices relative to income, U.S. companies rarely earn more than $1 million per film shown in China, one industry analyst said.

In Shanghai, where the average monthly wage is around 900 yuan ($108), theatres can charge up to 45 yuan ($5) for popular foreign features.

By not opening up faster, China was shutting out investment in market development -- creating a movie-going habit among China's 1.2 billion people and building cinemas -- and in its own film industry, industry sources said.

Access to foreign funds, technology and expertise would help the state-controlled film industry develop and thrive, the sources said, pointing to the open though heavily-taxed Indian industry as an example.

``They are Indian people and they want to see Indian films,'' Warner Brothers' Cheah said, adding that Indian films accounted for 90 to 95 percent of that market.

``Heavily protected industries tend to decline more rapidly than those that are not protected,'' Cheah said.