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COMPANY TOWN : Action! Hollywood Sees It in China : Asia: Movie types flock to Shanghai’s fledgling film festival in the hopes of getting a foot in the import door.

TIMES STAFF WRITER

There are no buxom starlets or all-night champagne parties. The biggest star this year, after Faye Dunaway, is a mutant cult hero, the Toxic Avenger. Lawyers outnumber paparazzi.

The focus of Shanghai’s second international film festival seems to be all business and little glamour--most of the sparkle is in the eyes of Hollywood executives imagining the prospect of 1.2 billion Chinese moviegoers.

“Nearly half of [Hollywood’s] revenues come from foreign markets,” says producer Mike Medavoy. “It’s clear why American companies want to be in China.”

Although the Chinese government is holding the foreign film industry at arm’s length to protect its own fledgling industry as well as “spiritual values,” movie people have flocked here from around the globe to get a foot in the door.

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Above the clink of cocktail glasses at the opening reception rises the irrepressible Hollywood buzz:

* Beijing vetoed scheduled clips from Oliver Stone’s upcoming film “Nixon” and panned his planned picture about Mao Tse-tung.

* Sony Pictures will reportedly provide programming for China Central TV.

* Faye Dunaway hopes to film the story of American author Pearl Buck here, and producer Medavoy--a Shanghai native--will make a movie about his hometown.

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* United Artists is close to getting permission to build China’s first multiplexes, and Universal is building a theme park with Shanghai Film Studio.

But the biggest talk of the festival, which began last week and runs through Monday, is whether China will let more foreign movies into the country--and more profits out.

So far, foreign filmmakers have been at the mercy of China’s Film Ministry, which allowed just 10 U.S. movies into the country this year through the state-run monopoly, China Film Import and Export. But Film Ministry officials recently hinted that it may permit three major Chinese studios to import more films next year, opening the door a crack wider for Hollywood.

But while officials publicly deny a policy change, they privately acknowledge that a slow opening for imports is inevitable and could be announced within a month or two.

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The argument that may move resistant monopoly holders: Let Hollywood subsidize Chinese competition with Hollywood.

Struggling domestic studios need money to fend off foreign films, and more Hollywood blockbusters would help generate that much-wanted cash. Last year, imports brought China Film 60% of its $12-million revenue, and this summer movie attendance jumped 70% in Beijing, partially due to new U.S. pictures such as “True Lies,” “The Lion King” and “Speed.”

That kind of success has studio heads lining up.

“It sounds great. We’re thrilled,” says Larry Kaplan of Disney’s Buena Vista Entertainment, which is reaping the profits from “The Lion King,” one of the most popular films to show in China so far.

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But he notes that carefully limited runs and current revenue-sharing arrangements mean foreign companies are not making as much money as ticket sales would suggest. Although “Forrest Gump” and “True Lies” both grossed more than $2 million in China, U.S. studios can keep just over a third of the profits, and then have to pay heavy taxes on that share.

In China now, says Kaplan, “a hit, at the end of the day, brings in less than a small European country. . . . In the big picture, it’s insignificant.”

Because of the big bites out of profits, entertainment companies are exploring other ways to tap the Chinese market, from building theme parks to theater chains. Some studios, like Twentieth Century Fox, are looking at producing movies exclusively for the booming Asian audience, catering directly to local tastes.

The novelty of big American films has so far guaranteed record ticket sales in China, but some movies have not done as well as expected. Chinese audiences didn’t get many of the culture-bound references of “Forrest Gump” and considered the slow-witted, fast-running Gump an unlikely hero. The explicit violence and jumbled chronology of “Pulp Fiction” proved to be too much for some filmgoers, who walked out of a festival screening halfway through.

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Wu Mengchen, the president of China Film, is confident that Chinese filmmakers will soon give international pictures a run for their money. He proudly points out that the country’s Academy Award entry for best foreign picture, “Red Cherries,” has beat out all of the imports at the box office in China. And he boasted of international award winners such as Chen Kaige’s “Farewell My Concubine,” and Zhang Yimou’s “To Live,” even though the Chinese government originally disavowed them.

Tien Congming, the vice minister of radio, film and television, dodged questions about when import restrictions would be relaxed and instead urged international executives to open their minds, if not markets, to Chinese films.

“From 1985 to 1993, America exported 54 films to China but only imported two from China,” he says. “Who is more closed?”

Warner Bros., taking the hint, is negotiating to distribute one of China’s top hits, either “Red Cherries” or “In the Heat of the Sun,” a popular tale of the Cultural Revolution through a young boy’s eyes.

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Other studios are taking a careful look. “There are some damn good pictures being made in China today,” says Tom Elliot, managing director of United Artists Theaters.

But most executives bristle at suggestions of regulated reciprocity or any further government-imposed controls. America is wide open to imports, says L.A. entertainment lawyer Peter Dekom--the only regulator is the market. “You can’t force people to go see a movie,” he says.

But dealing with a state that wields such strict control can have its benefits as well, independent producer Megan Gathercole found when scouting locations for her film “Testudo.” Officials offered to remove power lines that would distract from a scene supposed to be set in ancient China, even though it would leave a village without electricity for six weeks. They also volunteered to rebuild crumbling sections of the Great Wall.

“I can’t complain about service in China,” she says, laughing. But “I had to say, ‘No, thanks.’ ”

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