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Major Chinese movie star disappears after being embroiled in tax evasion investigation

Up until a few months ago, the future looked bright for Fan
Bingbing. As one of China’s biggest movie stars, she had
featured in a couple of Hollywood superhero blockbusters and
scores of local films, with many other projects in the
pipeline.

Then in June, she became embroiled in a scandal about movie
stars under-reporting their earnings, resulting in Chinese tax
authorities investigating the industry — including Fan — for
possible evasion. The 36-year-old actress, who has 63 million
followers on the Twitter-like Weibo, has since vanished from
public view — no more social media updates, no more paparazzi
photos and no more public appearances. Fan has denied
wrongdoing and a representative for her studio could not be
reached for comment.

For film executives, Fan’s disappearance is a reminder of the
perils of show business in the most-regulated major
entertainment market in the world, where the Communist Party
weighs in on everything from the appropriateness of costumes to
the salaries of movie stars. The episode is also prompting
Chinese studios to wean off a reliance on A-list stars to drive
big hits, a shift Hollywood made years ago.

This
file picture taken on March 26, 2013 shows Chinese actress,
singer and producer Fan Bingbing (C) attending the Viscap fashion
show with other celebrities at China Fashion Week in
Beijing.
MARK RALSTON/AFP/Getty Images

“The crackdown will force studios to focus on making quality
content rather than simply relying on the star-driven formula,”
said Leiger Yang, founding partner at Beijing-based Landmark
Capital, which invests in entertainment start-ups and studios.

A shift away from star-driven fare would come just as China’s
cinema boom is regaining momentum, fuelled by local hits
steadily displacing Hollywood blockbusters. But underneath that
healthy gloss, top Chinese studios including Huayi Brothers
Media Corp. and Zhejiang Huace Film & TV Co. said in annual
reports that higher celebrity pay is threatening profit
margins.

Fan vanished from public view one day before the State
Administration of Taxation on June 3 announced a probe into the
star’s tax filings after a former China Central Television host
posted what appeared to be partially redacted contracts that
allegedly disguised compensation Fan received from a studio for
a film. Weeks later, the host said the contracts weren’t
related to the star.

Fan’s silence and the crackdown are also intended to make a
political point, said Stanley Rosen, a University of Southern
California political science professor who studies China and
its film industry.

Chinese
actress Fan Bingbing poses during the photocall of the film
“Rizhao Chongqing” (Chongqing Blues) presented in competiton at
the 63rd Cannes Film Festival on May 13, 2010 in Cannes.

VALERY
HACHE/AFP/Getty Images

“Social media and public opinion, as you know, are important
drivers of policies in this area, particularly when it comes to
perceived inequalities, the super-rich, and cheating,” said
Rosen. Still, he predicts the government won’t deepen its
crackdown in a way that harms the industry longer term.

Authorities still want the industry to grow fast enough to
surpass North American box office, he said.

While authorities may not directly undermine bankable stars,
industry trends show stellar casts are no longer sure bets.

Just before “Hello, Mr. Billionaire,” a low-budget Chinese
comedy-drama without big stars became a summer hit, “Asura,”
the big-budget, star-studded epic on mythology bombed at the
box office and was withdrawn immediately after its opening
weekend. Trade magazine Variety called it “the most expensive
flop in Chinese history.”

Television streaming is also drawing fans to dramas without big
stars.

“Story of Yanxi Palace,” a 70-episode drama co-produced by and
streamed on iQiyi, China’s Netflix, emerged as a surprising
summer hit with a mostly young, lesser-known cast. A Qing
dynasty tale of scheming concubines, the drama has been
streamed more than 15 billion times, according to iQiyi.

The success of the drama “brings a new turning point and new
opportunities to the industry that has been pressured by
excessive compensation for celebrities,” iQiyi CEO Gong Yu said
in Beijing Aug. 26 at an event to celebrate the drama’s
conclusion. “The industry should stop overcompensating
celebrities in low-quality productions just because they have
huge fan bases.”

Gong’s streaming platform was among a group of film and TV
companies that issued a joint statement on Aug. 10 saying they
would work together to resist overpaying top talent and devote
more resources to better productions.

Over time, this will lead to a reduction in shoddy productions
and give the industry an opportunity to focus on quality, said
Yin Hong, a professor of TV and film studies at Tsinghua
University.

Only about half of the 800 or so films made by Chinese studios
last year made it to a cinema and among those 400, fewer than a
quarter sold at least 100 million yuan ($14.5 million) in
tickets. That’s in a market where the threshold for a hit is
considered about 1 billion yuan in sales.

“The industry is undergoing a lot of pain right now,” said Yin.
“But if dealt properly, it will be a good opportunity.”

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