As the entertainment industry seeks a greater presence in the fastest-growing movie market, the Obama administration is investigating some major Hollywood film studios for possible inappropriate payments to officials in China.
The Securities and Exchange Commission (SEC) has sent letters of inquiry that seek to answer questions about whether or not several entertainment companies, including Disney, 20th Century Fox, and DreamWorks Animation, have been involved with certain government officials in China and if payments had been made in the process.
The state-owned China Film Group had previously imposed a quota of 20 foreign films per year; however, in February 2012 restrictions were abruptly eased, and 14 technologically enhanced films, with their corresponding 2D counterparts, received quota exemptions.
At about the same time, DreamWorks Animation made an announcement that a breakthrough deal to build a production studio in Shanghai with some of China's biggest media companies had been made.
For a while now Hollywood movie studios have been seeking to loosen China's restrictions on foreign films, which the entertainment industry has viewed as potentially fueling the demand for pirated materials.
U.S. box-office sales in 2011 took a drop of about 5 percent, landing at approximately $10 billion, while Chinese movie revenues grew to $2.1 billion, an astounding 35 percent increase.
The action by the SEC is part of a general Obama administration investigation of potential violations of the Foreign Corrupt Practices Act, which prohibits the payment of bribes to officials of foreign governments.
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