Officials from the State Film Bureau declined to reveal details or approve the authenticity of the news. The two companies also refused to comment.

But calls for further reforms in China's film distribution system have already been highlighted by a string of events.

On November 3, 2000, the E'mei Film Corporation in Chengdu, capital of Southwest China's Sichuan Province, launched a drastic price cut in cinema tickets, dropping them from 40 yuan (US$4.8) to 5 yuan (US$0.6) in its 15 affiliated cinemas throughout the city. Cinemas in many cities followed suit and consequently raked in bigger box office revenues.

The China Film Corporation, the country's top film distributor and contractor for imported films, initially accused E'mei Corp of violating government regulations and written agreements, but later softened its accusations as the price cuts received a warm welcome from audiences, the media and many Chinese filmmakers.

The State Administration of Radio, Film and Television, also backed the price cuts. The shockwave created by E'mei's move is still having an effect.

Moonstone International Entertainment (China) Ltd Co pulled all 18 copies of its top-selling movie "Pavilion of Women" out of Beijing in mid-May and instead put them in smaller theaters which run newly released films during the first round of the screening period in smaller cities across the country.

The Beijing Xinyinglian Film Distribution Company, the capital's sole film distributor, was accused of violating agreements by cutting short the planned screening period which was expected to run through June 7.

"The distribution system in China is unique. For instance, film producers have to sign agreements with state-owned distributors instead of being able to contract directly with the movie theatres, a completely different system from that commonly accepted in international markets," said Lai Fung, general manager of Moonstone who worked as a senior marketing specialist in Hong Kong previously.

Although distributors get paid by film production companies, up to 15 to 20 percent of the whole marketing cost, they still do not guarantee a smooth distribution process or secure the right screening times as contracted, Li said.

Recent local media reports indicate that, since early May, many cinemas have gone back on their price cuts as they found they were not working as well as anticipated.

"Price cuts are by no means a wonder drug for the Chinese film market, which has long suffered from a number of 'chronic diseases'," said Shen Shufeng, vice general manager of the E'mei Film Corporation.

"Factors, such as more better quality films, better-equipped and managed theatres, maturer business strategies and an eradication of film piracy, will effect movie-goers' behaviour," she said.

"The distribution system needs further reform to give cinemas more incentive, more freedom and more options in doing business."

Under the planned economy which ruled for decades in the country, the China Film Corp was the only player in the distribution tier of the Chinese film industry for both domestic and overseas films and still acts as the sole legitimate agency for importing and distributing overseas films.

(Business Weekly 05/31/2001)