transformers china
A still from "Transformers: Age of Extinction" shows off an action sequence set and filmed in China. Paramount Pictures

You wouldn’t know it from the American flags waving wistfully in the trailer, but “Transformers: Age of Extinction” could be one of the biggest Chinese films this year.

Like previous entries in the “Transformers” series, the fourth installment of Michael Bay’s robot-heavy action franchise is produced by Hollywood’s di Bonaventura Pictures, but “Age of Extinction” also bears co-production credits from a pair of Chinese studios, Jiaflix Enterprises and the China Movie Channel. “Transformers: Age of Extinction” was shot extensively in the Chinese mainland and features Chinese actors Li Bingbing and Han Geng, making it the largest of a new group of Hollywood blockbusters that do more than pay lip service to the international market.

With less than a month before the premiere, “Transformers: Age of Extinction” is aggressively courting the Chinese market. Paramount has partnered with the China Movie Media Group to promote the film heavily across the nation.“Transformers” is set to close the Shanghai International Film Festival only a few days after its world premiere in Hong Kong. Among the more creative pitches is a video message from Mark Wahlberg wishing Chinese students luck on their upcoming -- and extremely stressful -- college entrance exams.

“Hey, everyone, I’m Mark Wahlberg, star of the new movie Transformers 4: The Age of Extinction," Wahlberg says with the assistance of Chinese subtitles. "The annual college entrance exam is coming, so I’d like to wish all of you students out there lots of luck, and don’t forget to catch Transformers 4 -- after the exam!”

From casting to content to promotion, “Transformers: Age of Extinction” is heralding the age of the truly international blockbuster.

This isn’t an accident; China is the second-biggest film market in the world, and it’s only going to get bigger. The country’s box-office grosses in 2013 hit $3.6 billion, and 2014 is headed for a take of $5 billion, according to the Hollywood Reporter. (Deadline estimates a slightly more modest $4.5 billion.) To meet growing demand, China added more than 5,000 screens in 2013 alone, Variety reports. The U.S. box office, by comparison, is expanding at a significantly slower pace, hovering at $10.9 billion in 2012 and 2013, up slightly from 2011’s $10.1 billion. If the numbers continue along that path, China could rival or overtake the U.S. box office by the end of the decade, and Hollywood is struggling to move into that market.

“It’s a market where if you can get through the quotas they have in place, you can make a lot of incremental money on your films. It’s the second-largest market and it’s growing at a very rapid rate,” Anthony Wible, managing director of entertainment and digital media at financial advisory firm Janney Montgomery Scott, told IBTimes.

“Transformers” is hardly Hollywood’s first attempt at reaching out to Chinese audiences, but it’s arguably the smartest -- and the most thorough. Last year, Marvel’s “Iron Man 3” boasted a co-production status with China’s DMG Entertainment, and director Shane Black filmed about three minutes’ worth of scenes exclusive to the Chinese cut of the film. But most Chinese audience members were reportedly turned off by the scenes, which pandered to the audience with product placement and lines like, “Tony doesn’t have to do this alone -- China can help.”

This year’s “X-Men: Days of Future Past” tried a more subtle approach that worked out more smoothly. Fox’s time-traveling superhero feature set a final-act fight scene in China and cast Chinese star Fan Bingbing as the teleporting X-Man Blink. (Fan also appeared in the Chinese-only scenes of “Iron Man 3”). Despite these efforts, “Days of Future Past” uses its time travel mechanism to launch a soft reboot of the X-Men series at the end of the film, meaning, for purposes of the story, the Chinese scenes effectively never happened.

“Transformers: Age of Extinction” is, by contrast, the first of a wave of American blockbusters to make a truly naturalistic effort at integrating Chinese and American content, and it’s likely to pay off handsomely. The last film in the series, “Transformers: Dark of the Moon,” took in $173.6 million in China and currently stands as the country’s fourth-highest grossing film ever.

Still, there are a number of risks in every business venture, and Hollywood’s move into China doesn’t mean the market is strictly a cash cow. For one, while the Chinese box office has been growing at an enormous rate, American studios get a smaller slice of the gross than in any other foreign market.

“It’s not the most lucrative market for your film given that the film rental rates are heavily skewed in favor of the exhibitors,” Wible said. In the United States, Wible noted, exhibitors and studios typically split film gross half and half, but in China, local exhibitors receive 75 percent of the revenue while studios receive only 25 percent.

“It’s great because it’s all incremental dollars, but getting $100 million in China isn’t the same as getting $100 million in Latin America,” Wible added, noting that Chinese exhibitors guarantee studios the lowest percent of box office revenue in the world.

There is, however, a workaround to this, which “Transformers” and others are employing. While foreign studios receive only 25 percent of the box office gross in China, studios that co-produce their features with Chinese production companies receive a better cut of 38 percent, China Briefing explains. That still isn’t as good as other foreign markets, of course, but it’s a step up. Going forward, more and more studios are likely to use the co-production route as a means of boosting their take-home in China.

Some studios are banking on the Chinese market enough that they’re permanently expanding into the country. In 2012, DreamWorks Animation announced the joint venture Oriental DreamWorks, designed to produce animated films for both Chinese and American markets. Next winter, DreamWorks Animation and Oriental DreamWorks will jointly launch “Kung Fu Panda 3,” about a third of which will have been produced in China.

Even more than “Transformers: Age of Extinction,” the latest installment in the “Kung Fu Panda” franchise won’t just be a foreign export, it will be a collaboration between creative teams on two different sides of the globe, and a sign that the future of large-scale filmmaking no longer belongs exclusively to Hollywood.