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US-China Market Watch: Box Office Record, Microsoft and Xiaomi

March 05, 2018
Chinese couple watching a movie in a movie theater
(Photo credit): and Les Jacobs

Your monthly roundup of the latest US-China business and industry news.

China’s moviegoers set Lunar New Year box office record

Over the Lunar New Year weekend, Chinese consumers went to the movie theater in droves and brought in $543 million in box office sales, more than double the previous Chinese New Year record of $224 million in 2016.

However, the jump in ticket sales isn’t due to any Hollywood blockbuster; it’s purely built on the strength of China’s own growing domestic movie theater and entertainment business (although, China also does not open foreign films over Chinese New Year weekend).

“Monster Hunt 2,” the sequel to the 2015 box office hit, earned $85 million opening day and grossed $190 million over the weekend, the largest single-day and opening weekend of any movie in China’s box office history. The previous record holder for both was “The Fate of the Furious,” the eighth installment of The Fast and Furious franchise.

“Monster Hunt 2” wasn’t the only domestically produced film to entice Chinese audiences. “Detective Chinatown 2” and “Monkey King 3,” both of which premiered over the same weekend, opened to $152 million and $80 million, respectively, with “Detective Chinatown 2” actually surpassing “Monster Hunt 2” in box office earnings the Wednesday after the New Year.

Alibaba and STX bet on China sci-fi co-production

Alibaba Pictures and STX Entertainment, U.S.-based multi-platform entertainment studio, are partnering to develop and co-produce upcoming science fiction film, “Steel Soldiers.” STX will handle the U.S. and international distribution, and Alibaba will handle Greater China.

Alibaba and STX’s film project is part of what The Hollywood Reporter refers to as China’s “sci-fi moviemaking boom.” Although the genre isn’t particularly popular amongst domestic Chinese moviegoers, with the rising popularity of Hugo Award-winning sci-fi novelists Liu Cixin (whose short story “The Wandering Earth” is being adapted into a film) and Hao Jingfang, China’s film industry currently has 10 high-profile projects slated for release over the next 12-18 months.

There are still some technological challenges when it comes to China’s homegrown entertainment—namely, visual effects, which sci-fi genre films typically require a lot of and where China’s still-maturing industry can’t quite compare with Hollywood’s standards.

Trump considers metals tariffs

The United States seems to be edging closer to a global trade war, after U.S. Commerce Secretary Wilbur Ross suggested steep tariffs on imported steel and aluminum. Trump plans to impose a 25 percent tax on all imported steel and a 10 percent tax on imported aluminum. The aims of these tariffs is to boost the domestic steel industry, but it could end up inciting a trade war instead.

Although much of Trump’s steel-related rhetoric has focused on China, China is no longer the top steel exporter to the U.S.—as of 2017, Canada is actually no. 1, with 16 percent of all U.S. imports coming from there. China doesn’t even make the top 10.

Even though it’s no longer a major steel exporter to the U.S., such proposals would drastically affect China, and possibly the entire world. China’s Ministry of Commerce has already criticized such a move and said it would “take necessary measures to safeguard its legitimate rights,” should Trump agree to these measures.

Xiaomi and Microsoft partner to make AI speakers, smartphones

Microsoft has signed a memorandum of understanding (which is not legally binding) with Chinese smartphone company Xiaomi to work together in cloud computing, artificial intelligence and hardware.

In the agreement, Microsoft would allow Xiaomi access to its cloud computing products to develop “upgraded” phones, laptops and smart devices, with the hope of bringing these products to the international market. The two companies are also talking about integrating Microsoft Cortana, a virtual assistant created for Windows 10, with Xiaomi’s budget AI speaker.

Xiaomi is China’s fourth-highest selling smartphone company and aims to bring its phones to the U.S. market. Conversely, Microsoft hopes its partnership with Xiaomi will grant it greater access to the Chinese market. The two companies worked together before in 2015, when they signed an agreement to test Windows 10 on Xiaomi devices.

Apple to accept Alipay in local Chinese stores

In what is seen as a push to boost growth in China, Apple Inc. has started accepting Chinese mobile payments app Alipay, which is owned by China’s no. 1 e-commerce company Alibaba, at its 41 local stores. This will be the first time Apple, which has its own mobile payments platform called Apple Pay, accepts a third-party payments system at a physical store. Apple has accepted Alipay on its Chinese website, iTunes store and App store for more than a year now.

Apple is also shifting user data to Chinese cloud-based centers and gearing up to open its second data center in Ulanqab City in China’s Inner Mongolian Region. Reports show that Apple is also in talks to buy storage chips from state-backed Chinese chipmaker Yangtze Memory Technologies.

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