The Securities and Exchange Commission has begun an investigation into whether some of Hollywood’s biggest movie studios have made illegal payments to officials in China to gain the right to film and show movies there, according to a person with knowledge of the investigation.
Hollywood has been trying to get more films into the Chinese market for decades, but efforts have picked up in recent years in large part because China has identified cinema as a growth priority. China is racing to build more modern theaters to entertain an expanding, cinema-loving middle class. The country is also escalating local film production, partly as a way to spread its culture across the globe.
In February, Xi Jinping, China’s vice president and likely future leader, visited politicians in Washington and movie executives in Hollywood. Soon after, China raised the number of foreign-produced films that can be shown there each year and increased the portion of box-office revenue from China that the movie studios get to keep.
Under the agreement, China agreed to allow 34 foreign-produced films to be shown annually, up from a quota of 20, as long as the additional films use either Imax or 3-D technologies. China also agreed to let studios keep about 25 percent of the box-office revenue; currently, Hollywood gets about 15 percent.
The discussions leading to the deal were conducted at a high level, as Vice President Joseph R. Biden Jr. joined Mr. Xi in personal negotiations. Given the level of diplomacy involved in reaching the agreement, the S.E.C. inquiry could be an embarrassment to the Obama administration.
Full story: S.E.C. asks if Hollywood paid bribes in China