BEIJING: As Sino-US trade tensions heat up and China’s economy starts to witness slower growth, government officials seem to be searching for scapegoats to blame for the nation’s current woes and be made an example of in its corruption crackdown.
That’s one line of argument that could explain the recent public shaming of China’s highest-paid celebrity, Fan Bingbing.
YIN YANG CONTRACTS
An almost perfect storm of political intrigue has been brewing to set the stage for Fan’s disgrace in May, after former state-owned CCTV host and producer Cui Yongyuan posted details on his blog that she was allegedly dodging taxes with her contracts.
Ms Fan was scheduled to appear in Feng Xiaogang’s film, Cell Phone 2, and agreed to four days of work at the studio. Despite the short stint, she signed a formal 10 million yuan (US$1.56 million) that was duly reported to Chinese tax officials.
Nevertheless, Cui disclosed in his article, which had tens of millions of views, that Fan had signed two contracts, known as “yin yang” agreements in the country.
One contract reflects a lower payment for the actor, while the other indicates the actual payment. Fan’s other contract stipulated that she would receive 50 million yuan (US$7.8 million) for less than a week’s work.
Fan demanded other diva-like perks, such as the use of two luxury vehicles, compensation for her make-up artist at a full-month’s income at 80,000 yuan, daily food allowances amounting to 1,500 yuan and rights to amend the script.
Although requests for such perks are considered common in China’s film and TV industry, might it have been that Fan had erred in judgement with the timing of her actions?
While Fan was scoring big deals and making a killing through these alleged “yin yang” contracts, at around the same time, the China Alliance of Radio, Film and Television, an agency closely aligned with the Chinese government, had issued a public statement calling for China’s producers to limit actors’ paychecks at 40 per cent of total production costs and for leading actors not to receive more than 70 per cent of all acting fees.
CAUGHT IN A HEATED DISPUTE
Fan’s Hollywood stardom could be a significant reason for why she had become a target for Chinese tax officials.
As one of China’s biggest stars, Fan is also fast gaining traction in the US with the success of her role in the Hollywood blockbuster, X-men Days of Future Past. She has also recently signed a deal to appear in another Hollywood movie, 355, a spy-thriller starring Jessica Chastain and Penelope Cruz.
Hollywood producers are facing off in a heated dispute with Chinese movie distributors over remittance issues, meaning that although China ranks as the second-largest theatrical market since 2012, according to Green Hasson & Janks, an independent Los Angeles-based tax advisory and consultant firm, when it comes to distributing foreign films in China, Hollywood has not been able to enjoy much of China’s box office success.
This lack of success is due to various market-access restrictions, such as strict revenue-sharing quotas - in which the Chinese government imposes quotas on the share of revenue or flat fees paid to foreign film production houses.
The ceilings for these quotas have been raised in recent years as the local Chinese film industry began to take off, to incentivise cinemas to look at local filmmakers instead.
Regardless, there have been calls to open up China’s entertainment industry to greater competition. This is why the battle lines have been drawn between China and Hollywood.
Meanwhile, Sino-US trade tensions will likely lead to Hollywood film producers struggling to make headway on resolving their disputes with Chinese film distributors, as well as to receive Beijing’s support on lifting market access restrictions.
Until Chinese President Xi Jinping and US President Donald Trump resolve the trade war, Hollywood and the Chinese entertainment industry will be caught in the middle and suffer the consequences for it.
A PERSONAL EXAMPLE
Amidst all these, it is no wonder that Fan has been made an example of.
Ms Fan must pay a huge tax fine and be made to atone for her wrongdoings.
Chinese stars, least of all the darling of China’s film industry, cannot be grossly profiting individually through under-the-table means from the growing entertainment industry when the country is grappling with American accusations of protecting sectors that are uncompetitive.
Fan’s public humiliation in recent months also sends a signal that the days of Chinese superstar entertainers receiving blockbuster “yin yang” contracts have ended – and that the Chinese government has the political will to do the same to the reputation of any other industry champion.
Reportedly, the local Wuxi Tax Bureau in Jiangsu Province ordered her to pay a total fine of 883 million yuan (US$129 million) in back taxes, fines and penalties. The good news is that she can avoid prison with prompt payment.
Fan has agreed to the settlement and pleaded for forgiveness from her fans. Fortunately, she remains popular and many of her Chinese fans will continue to support her in the years ahead.
The same cannot be said of any other Chinese industry leader that dares to do otherwise in the coming months and years.
Tom McGregor is a commentator on Asia-Pacific affairs based in Beijing.