COMPANY TOWN : Raising the Red Curtain : Film: Chinese industry sources say the government is poised to lift the state monopoly on foreign movie imports.

BEIJING — In a move that could allow more American movies into China, the Chinese government is preparing to break the state monopoly on film imports and allow major domestic studios to import and distribute foreign films, according to film industry sources.

Under the plan to save China’s financially paralyzed movie industry, three of China’s top filmmakers--the Beijing, Shanghai and Changchun studios--will be allowed to import some foreign films this year, the sources said.

How many imports they are allowed will depend on how many successful domestic movies they make. Next year, the arrangement will be extended to other studios, to be chosen based on the quality of their products.

Chinese Film Ministry officials refused to confirm the move, saying they needed first to “unify positions” on the decision and pass it down the bureaucracy before going public with it.

Industry sources said the decision was announced at a meeting of studio executives last week, at the same time as fans jostled to get into a major Chinese movie event: the 1995 Sundance Film Festival, an offshoot of the noted U.S. festival of the same name. The young crowd came to ogle participating celebrities such as directors Zhang Yimou and Quentin Tarantino, and to watch films such as “Pulp Fiction” and “Red Cherries,” this year’s official Chinese nominee for the best foreign film Oscar.

As for the import reforms, which had been expected for more than a year, they deal a further blow to monopoly importer China Film, which lost its exclusive control over domestic film distribution in 1993.

China Film’s monopoly will be dismantled “in stages,” one Film Ministry official said. Last year, China Film’s administrative control on movie imports generated 60% of its $12-million revenue, which resulted in $1.2 million in profit.

The dumping of middlemen like China Film, said Hong Kong-based ERA International Vice President Barbara Robinson, will make the importation of foreign movies much more profitable by allowing exhibitors to work more directly with distributors. How profitable film imports become “will depend on how far this overhaul of the distribution system goes,” she said. The reforms may not go so far, at least in the near term, as to let loose a deluge of imported films. Chinese film studios crank out about 200 movies a year, while China Film annually imports about 60. This proportion may stay substantially the same, if fixed by a cap on the number of imported films. This limit, assigned by Communist culture czars, is not publicized but often spoken of by industry analysts.

But even a small increase in the number of imported films helps the industry, not to mention satisfying popular demand for foreign works. China’s decision last year to import 10 of the best foreign films annually has proved a dramatic success, much to the distress of some domestic filmmakers.

Hollywood executives say that any progress in opening up the Chinese market is welcome since China is considered a huge opportunity for U.S. filmmakers.

Dubbed screenings of such films as “The Fugitive,” “The Lion King,” “True Lies,” “Forrest Gump” and “Speed” have revived mass interest in foreign cinema here. “Forrest Gump” and “True Lies” both grossed more than $2 million in China.

Box office receipts in the first half of 1995 jumped 50% over the same period last year.

With import quotas based on production of successful domestic movies, industry experts say studios have an incentive to make good movies. They will “have to produce some good Chinese cinema” if they want to import, said ERA’s Robinson.

The money they make from a few imports can be plowed into making their own films, which, if successful, can get them higher import quotas. “It’s a win-win situation, a positive cycle,” said Luo Yan, a director and former actress now at South Pasadena-based distributor Moonstone International.

The new policy “will make it much easier for me to work with the film studios and find investment for new projects,” director Ye Daying said.

Ye’s latest film, “Red Cherries,” about Chinese studying in Nazi-occupied Russia in World War II, has broken local box office records and even trounced the China earnings of the top 10 imports. Last week, China’s government rewarded Ye by naming the film its candidate for the best foreign film Oscar at next year’s Academy Awards.

While the new deal indicates less official “focus on ideology and more on local production” of movies, according to Robinson, it will hardly mean a vacation for Communist censors. While some responsibility for censorship of imported films may be passed down to local film authorities in charge of the studios, many pictures are still likely to be vetted by national film authorities, all the way up to and including China’s conservative propaganda chief Ding Guangen.