Sino Strategies: China's Influence & its Implications for the U.S.

Image Credit: CMC Pictures/Everett Collection

Summary

• Ne Zha 2 became the highest-grossing animated film ever, reflecting China’s growing influence in global cinema and advanced animation technology. The success aligns with China’s goal of becoming a major cinematic power by 2035.
• American media companies face increased competition but could benefit from partnerships with Chinese studios. Meanwhile, consumers can expect more Chinese blockbusters with global appeal in the coming years.

The Rise of Ne Zha 2

Earlier this year, Ne Zha 2 became the biggest animated movie of all time in terms of theatrical box office revenues, surpassing Disney’s Inside Out 2. The Chinese animated fantasy film is set to cross the $2 billion mark in global theatrical sales, becoming only the 7th film to do so. 

The sequel to the blockbuster Chinese animation film, Ne Zha 2 was released on Chinese New Year’s day, January 29th. The film is based, like many other Chinese movies, on a mythological figure — the deity Ne Zha — and the film’s script is adapted from a popular 17th century Chinese novel, The Investiture of the Gods. 

Chinawood & the Future of Global Cinema

The success of Ne Zha 2, while significant, is not necessarily surprising, especially when considered alongside the steady evolution of China’s film sector. Domestic animation in particular has picked up steam in 2023, after the COVID-19 restrictions were lifted, with popular releases such as “Chang An,” a re-telling of Chinese poet Li Bai’s life from his friend’s perspective. More broadly, China has plans to become a major global cinematic player by 2035. 

Some of the highest grossing Chinese films are also vehicles for the Communist Party’s agenda. Take The Battle at Lake Changjin, the 2nd largest film in the PRC. It was commissioned by the Central Propaganda Department of the CCP as part of the Party’s 100th anniversary celebrations. What’s more, the film’s sequel, The Battle at Lake Changjin II, is the 10th highest grossing Chinese film. Clearly the pro-China narratives of these films resonate with domestic audiences. 

Ne Zha 2 also demonstrates China’s growing influence in animation and VFX technology. The film’s closing credits list nearly 140 Chinese animation studios involved in the project, and it has allegedly leveraged cutting edge technology solutions to animate sequences throughout the film. China’s global technology ambitions will likely continue to feed the development of innovative animation technologies.  

Implications for the U.S.

1. U.S. Policy Implications

Ne Zha 2’s success corroborates China’s growing global soft power. The film has grossed an estimated $18 million after three weekends in the U.S. and has remained in the top five at the North American box office. As technology continues to create pathways across national boundaries, the U.S. may have to find creative ways to address the challenge of maintaining leading cultural influence around the world. 

The film’s success also highlights potential strategy for boosting theatrical sales domestically. In an effort to diversify cultural activities during the Spring Festival, the Beijing municipality distributed around $5 million in cinema vouchers to Chinese citizens. American municipalities could consider pursuing similar strategies with more frequency or intensity to boost consumer spending. 

2. U.S. Business Implications

For U.S.-based media and entertainment companies, Ne Zha 2’s success likely signals the beginning of increased competition from Chinese film production companies, especially in animation. It also signals the large potential addressable market that exists among moviegoers in China. To take advantage of the large Chinese market and compete with rising Chinese studios, American media companies could pursue distribution deals with the Chinese government, consider licensing Chinese content on their direct-to-consumer platforms, and seek partnerships or bundling opportunities with Chinese players. 

3. U.S. Consumer Implications

More Chinese blockbusters are likely to follow, and given Ne Zha 2’s success, future films will likely have an increasing focus on global audiences as they seek to grow beyond domestic sources of revenue.