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China looks to boost its film industry with tax incentives

China uses taxes to subsidize the development of its homegrown movie industry

China on Thursday unveiled a package of tax breaks and other incentives to support its domestic movie industry, including a $16-million annual fund to subsidize the production of five to 10 films.

The new program aims to improve the use of technology in movie production, boost exports of Chinese films and build more professional film-related websites, among other goals.

A value-added tax related to sales of copyrights, distribution and other items will be waived for five years, until the end of 2018. The government also is seeking to incentivize the construction of movie theaters in central and western China, areas that are less developed than the country’s eastern coast.

The government said it would also work to encourage banks to expand lending for movies and support the development of other financial products to facilitate film production. Private equity and venture capital funds will be encouraged to invest in the industry, and film companies themselves should be encouraged to issue corporate debt.

Mainland China's box-office earnings reached about $3.5 billion in 2013, up more than 27% from 2012, and the market is now second behind only the U.S. and Canada. The country now has about 20,000 movie screens, about half the number as stateside.

Chinese officials are eager to bolster the domestic film industry, not only for economic reasons but also to boost the country’s cultural "soft power" by exporting its entertainment products overseas a la Hollywood.

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