To Bribe, or Not to Bribe: Is That Really a Question?

by Robert Cain for China Film Biz

April 29, 2012

The SEC doesn’t often make headlines in Hollywood, much less in China, but last week they dropped a bomb that made waves on both sides of the Pacific. Chinese and American film industry circles have been atwitter with talk over the SEC’s announcement that it is investigating all six of the major U.S. studios for possible violations of the Foreign Corrupt Practices Act (FCPA) with respect to their activities in China.

Although the SEC and the studios have all been very tight-lipped about details so far, the common presumption is that someone may have paid bribes to Chinese officials in order to obtain favorable business treatment.

If any such dirty dealings did take place—and I’m not saying they did, but it’s highly unlikely that the SEC is just fishing here—they would have most likely involved bribes or kickbacks to Chinese officials from an American company (or companies) in exchange for film import quota slots. Because China severely limits its number of Hollywood film imports, and because Hollywood films are doing bang-up business there—major Hollywood releases are now routinely cracking the $50 million mark at the Chinese box office—each quota slot represents a big, valuable chunk of business. It’s not hard to imagine six- or seven-figure “gifts” going to Chinese film officials for quota slot allocations.

The SEC’s announcement could hardly have come at a worse time for China’s Communist Party. Already beset with the radioactive political and PR fallout of the sordid Bo Xilai scandal (which includes, by the way, allegations of massive government corruption and bribe-taking), the Party is likely to stonewall the SEC and probably deny, in its usual ham-fisted fashion, that any wrongdoing ever occurs in the People’s Republic of China. That the SEC chose to spring its very public press release during the middle of the Beijing Film Festival, China’s big annual showcase for its film industry, merely added salt to an already festering wound.

The controversy has cast light on an oft-considered challenge for U.S. companies doing business in emerging economies: How to compete without paying bribes in countries where bribery and corruption are de rigeur. Where, in fact, not paying bribes can be tantamount to not getting anything done at all. Is it really wrong—leaving aside the strictly legal issues—to pay bribes when bribery is an established, even expected, aspect of doing business?

Having lived and worked extensively in China, Russia, Mexico and the Middle East, all places where bribery is very much a part of the fabric of daily life, I have often been forced to confront these questions. Personally I find the abuse of public office for personal gain detestable, but I’ve often found my moral indignation to be quaintly irrelevant in the face of brutish demands for cash to win favor or resolve problems. And while I have never paid a bribe in 25 years of doing business in China, I can’t really claim that my hands are entirely clean.

For instance, In Moscow I once loaned my driver the equivalent of $120 in rubles to pay a traffic cop to write up a truthful police report so that she wouldn’t be blamed for an accident in which a cement truck had plowed into the side of her car. In a business emergency in Kiev I paid the stationmaster a 150 percent ticket premium to secure a berth on a “sold out” train when I knew full well that the train was nearly half empty. The situation was all too clear: no bribe, no ticket. And in a truly frightening incident in Moscow I paid three armed cops $150 to persuade them not to gang rape my assistant in the back of their police van.

In China I’ve always been able to read potential bribery situations as they develop and extricate myself before I’m confronted with such problems. In southern China back in the late 1980s when I was asked to give “tea money” or to “take tea” I knew that was a coded request for a bribe. Upon hearing such proposals I would tell the would-be bribe receiver to take a hike. Needless to say, I didn’t always get what I wanted.

The penalties for violating the FCPA are stiff, at least on paper: fines of up to $5 million and up to 20 years in prison. But in practice, in the 35 years since President Jimmy Carter signed the FCPA into law, the SEC has yet to actually send any FCPA lawbreakers to jail.  Hollywood studio executives who might currently be under investigation needn’t worry much about personal repercussions; the SEC tends to prosecute and fine corporations, without ever naming the individuals who committed the crimes.

Given the risks and rewards, the decision matrix for an American corporate executive in China would seem to dictate paying bribes. The personal upside, in the form of enhanced business opportunities and bonuses, appears to far outweigh the personal downside of one’s company receiving a fine. Given this mix of motivations and disincentives, it’s likely that at least a few Hollywood executives have taken the risk and engaged in proscribed activities to benefit their businesses in China.

Still, at the risk of appearing naive or idealistic, I would urge anyone considering taking such actions to reconsider. For one thing, the SEC could well take a harder line on FCPA violations in the future. And engaging in bribery can be a slippery slope leading to unanticipated consequences. This kind of activity tends not to remain secret for long–after all, there must have been a whistleblower who brought the SEC’s attention down on the studios.

Although not always as expeditious as cold, hard cash, I’ve found that polite persistence, resourcefulness, and even stubbornness, can be effective ways of cutting through what might otherwise turn into bribery scenarios  in China. Very often if one person is an obstacle, it may be possible to find another who will be more honest and honorable in their dealings. And sometimes the deal just might not be worth the trouble. Letting people know that you won’t negotiate with financial bullies can often be all that’s needed to keep your business dealings in China aboveboard.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at and at

China’s Third Affliction and the Soft Power of Film

By Robert Cain for China Film Biz

December 11, 2011

China’s increasing focus on exporting its values could ironically spell opportunity for foreign filmmakers. Read on to learn how and why.

Back in 2008 the term “three afflictions” began appearing in the Chinese press to describe the major impediments that hampered China’s national strength during the past century. These were foreign aggression, poverty stemming from a weak economy, and the demonization of China by ‘hateful’ and ‘ignorant’ Western nations.

As the press stories told it, the first affliction was conquered by Mao Zedong when he unified China under the Chinese Communist Party (CCP) and expelled the last of the foreign occupiers, the Japanese. The second was thrown off when Deng Xiaoping declared “to get rich is glorious” and engineered the great Chinese economic miracle that continues to the present day.

With the first two afflictions licked, the CCP has now set its sights on tackling the third, which can be summed up as poor global public opinion. Government leaders are concerned that China’s negative image stands in the way of its international influence, and they’ve decided to do something about it.

A major party initiative to project China’s ‘soft power’—that is, its ability to shape global events by promoting its cultural values around the world—was announced in November by President Hu Jintao when he delivered a policy speech urging the country’s artists and writers to “get closer to the realities and lives of the masses, to uphold the spiritual torch of the Chinese nationality, and to produce a greater number of excellent works that live up to the history, the times, and the people.”

And then he said something that must have jolted every Chinese artist and intellectual: “Let all flowers bloom together and let hundreds of schools contend.” This statement directly echoed Chairman Mao’s famous 1957 statement “Let a hundred flowers bloom and a hundred schools of thought contend to promote progress in the arts and sciences and a flourishing socialist culture in our land.”

OK, enough history; what does all of this mean for filmmakers?

For one thing, it means money. Lots of it. Hu and his colleagues in the CCP are anxious that Western culture and values have gone global in a way that Chinese culture and values have not, so they are investing billions in the effort to export China’s own value system, building the world’s most modern soundstages, production facilities, post production houses, animation houses, and the like. ‘Soft power’ and the cultural means to promote it have been elevated to the highest level of strategic importance. This is tantamount to a war of words and ideas with the West.

But it takes more than artillery to win a war, it takes skilled personnel to operate the machinery. Winning minds takes the ability to generate creative ideas and the skills of persuasion, capabilities that the CCP sorely lacks. The post-1949 Communists have never before had to compete in the marketplace of ideas because in China they own and control the market.

To compete on the global stage China will need skills that it hasn’t needed before. Skills like story development and screenwriting for international audiences. Sophistication in marketing, advertising and distribution to successfully circulate movies to the far-flung corners of the globe. Above all, the ability to understand what makes international filmgoers tick: why they go to see the movies they do and why they don’t go to see Chinese movies.

These skills and capabilities aren’t going to magically appear inside China; they will almost certainly need to be imported. China’s top filmmakers—skilled directors like Zhang Yimou and Feng Xiaogang—have generated huge and loyal followings inside the country, but they do hardly any business outside. For instance, Feng’s recent Chinese blockbuster melodrama Aftershock, which racked up nearly $100 million in ticket sales in China, earned a paltry $62,962 from its release in the U.S.

More than either side realizes, China needs Hollywood. And for Hollywood’s legions of skilled but underemployed writers, directors, producers, rotoscopers, sound editors, marketers, distributors and other talents, this means money and opportunity. If you’re one of these talents, China has a shortage of your kind of expertise, and piles of cash to pay you for it.

Will seizing these opportunities mean selling out your values and becoming a mouthpiece (喉舌) of the Communist Party? Hardly. The past decade’s two greatest examples of films that successfully promoted Chinese culture were made by outsiders pursuing their own self-interest.

Crouching Tiger, Hidden Dragon, directed by Taiwan’s (!!!) Ang Lee, swept the world with beautiful and sensuous images of China, earning $200 million worldwide (nearly $300 million in 2011 dollars). And Dreamworks Animation’s Kung Fu Panda films have been highly praised by CCP members for their ability to entertain audiences both inside and outside China while remaining faithful to traditional Confucian values. The two Panda films have earned $1.3 billion in worldwide box office receipts, and  Dreamworks’ Chairman Jeffrey Katzenberg is in talks to set up a $300 million joint venture to make films in China. Although Katzenberg and Lee have done a great deal of good for China, no one is accusing them of being Communist Party lackeys or sympathizers.

Foreign filmmakers have an additional advantage over their Chinese counterparts: freedom. Remember Hu Jintao’s exhortation to “let flowers bloom and hundreds of schools contend”? His intent must have been to send a chilling reminder to the Chinese that their ideas and artistic contributions are welcome only so long as they toe the line of political correctness and espouse the party’s message. When Mao Zedong launched the original “100 Flowers” campaign in 1957, he encouraged uninhibited public discourse to uncover a variety of views and solutions to national policy issues. After six weeks of this ‘experiment’ with freedom of expression, Mao swiftly repressed or executed those whose views offended him. While Chinese artists must be extremely cautious to avoid a similar fate, the worst that can happen to foreign filmmakers is that their projects will be rejected by the censors.

As David Bandurski put it in his recent New York Times article, “China’s ‘third affliction’ is a self-inflicted malady” that it cannot cure by diktat. “Governments in countries with cultural censorship may no longer fear criticism at the hands of their own country’s cultural work, but they must endure the ridicule of the whole world.” China’s best hope for improving its global image will be to enlist outsiders—storytelling mercenaries, or modern-day de Toquevilles, if you prefer—to shine a light on that nation’s best, brightest, and most universal values. If you’re a Hollywood filmmaker, there is no shame in telling stories that explore the wonders of China’s magnificent 5,000 year old culture. If you can make globally successful films while you’re at it, China and its leaders will thank you.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at and at