Market Watch

China Import Restrictions Remain Despite WTO Ruling

April 08, 2011

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China has failed to relax import restrictions covering foreign books, music,  games and movies despite the passing of the 19 March 2011 deadline imposed by the World Trade Organisation (WTO) in late 2010.

When China joined the WTO in 2001 removal of tariff barriers and opening up to overseas investment was key to entry. In August 2009 the WTO ruled that China was not upholding these agreements with regard to the distribution of foreign media products in mainland China. In January 2010 the WTO rejected a Chinese appeal against the ruling and in December the WTO required China to respond by 19 March 2010.

China maintains a strict quota system restricting theatrical distribution of foreign films to around 20 Hollywood theatrical releases per year on a shared revenue basis (with up to 30 more permitted on a low flat-rate basis). Home video distribution is more relaxed, with up to 300 foreign titles released in China each year, but foreign companies may not import or distribute videos themselves and there are strict restrictions on how they may invest in local companies that do so.

The sheer size of the country combined with an increasingly wealthy middle class makes China a potential growth area for the sale of home entertainment products. However, the import restrictions and the practical problems of distribution in a country the size of China, combined with the rampant piracy that continues to plague the market, mean US studios have found it difficult to establish a viable legitimate business. The Motion Picture Association of America recently estimated that foreign media restrictions have assisted in the creation of a $6bn illegal DVD market in China.

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