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China’s Cultural Trade Strategy
This book aims to provide theoretical and empirical interpretations of certain phe-
nomena in the development of China’s cultural industry. Using the film and tel-
evision industries as the major cases, the author proposes suggestions on China’s
ongoing development of foreign cultural trade.
The author argues that China is well positioned to take full advantage of the
opportunities of globalization, to develop its cultural industry in a leapfrog manner.
China’s rapid economic growth drives the country’s development from a small cul-
tural market to a large one. Since it is a middle-income country, its cultural industry
still has a relatively large potential to grow. The study on China’s foreign cultural
trade strategy can contribute to the growing needs of people for a better life and
enhance China’s “cultural confidence”. With an explanation of existing practices,
this book also aims to make recommendations on China’s strategy for developing
foreign cultural trade in the era of globalization.
This book will be a good read for students, researchers and scholars of Chinese
studies, East Asian studies and culture economics, and those interested in China’s
film and television industries.
Luo Libin (Ph.D. of Economics) is Professor of Economics at Beijing Interna-

tional Studies University, China. Professor Luo is also a visiting researcher at the
Institute for Service Economy and Digital Governance, Tsinghua University, senior
researcher of Beijing Research Institute of Culture Trade, BISU, and researcher
at China Academy of “One Belt and One Road” Strategy, BISU. Luo’s research
interests include cultural and international trade, service trade and international
investment.
China’s Cultural Trade Strategy
Perspectives from Film and Television
Industries
Luo Libin
Funded by Beijing International Studies University 2022 Annual Academic
Work Publishing Funding
First published 2024
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2024 Luo Libin
Translated by Luo Libin and Li Zhixuan
The right of Luo Libin to be identified as author of this work has been
asserted in accordance with sections 77 and 78 of the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
English Version by Permission of Social Sciences Academic Press (China).
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Luo, Libin, 1977– author, translator. | Li, Zhixuan, translator.
Title: China’s cultural trade strategy : perspectives from film and television
industries / Luo Libin ; translated by Luo Libin and Li Zhixuan.
Other titles: Quan qiu hua bei jing xia Zhongguo fa zhan dui wai wen hua
mao yi de zhan lue. English
Description: Abingdon, Oxon ; New York, NY : Routledge, 2024. | Includes
bibliographical references and index. |
Identifiers: LCCN 2023008704 (print) | LCCN 2023008705 (ebook) |
ISBN 9781032544250 (hardback) | ISBN 9781032544281 (paperback) |
ISBN 9781003424796 (ebook)
Subjects: LCSH: Cultural industries—China. | Motion picture industry—
China. | Television broadcasting—China. | Mass media—Economic
aspects—China.
Classification: LCC HD9999.C9473 C455413 2024 (print) |
LCC HD9999.C9473 (ebook) | DDC 338.4/770951—dc23/eng/20230309
LC record available at https://lccn.loc.gov/2023008704
LC ebook record available at https://lccn.loc.gov/2023008705
ISBN: 978-1-032-54425-0 (hbk)

ISBN: 978-1-032-54428-1 (pbk)
ISBN: 978-1-003-42479-6 (ebk)
DOI: 10.4324/9781003424796
Typeset in Times New Roman
by codeMantra
Contents
List of Figures vii

List of Tables ix
Preface xi
Acknowledgments xv
1 An Introduction: Why Do I Write This Book? 1
2 Theoretical Studies Related to Cultural Trade 18
3 Opening Up of Film Market and the Development of Film

Industry in China’s Mainland 29
4 Imports of Cultural Products and Chinese Culture Going

Global: The Case of Film Import 48
5 Rise of China’s Economy and International Influence of

Standard Chinese Language 74
6 International Trade in TV Formats, Home Market Effects

and Chinese TV Program Exports 90
7 The Rise and Fall of the China’s Hong Kong Film Industry
and Its Implications for China’s Mainland 114
8 A Forecast on Film Box Office in China’s Mainland—on

Strategies of China’s Mainland Film Industry 129
vi Contents
9 Opportunities, Challenges and Strategies for the

Development of Foreign Cultural Trade in China 146
Bibliography159
Index165
Figures
1.1 National income per capita in 1965 and 2016 6

4.1 Relationship between the global share of GDP and the global
share of box office (2015) 57
5.1 Minimum effective scale of a language survival 79
6.1 Distribution of sources of variety shows on MediaCorp Channel
U, 2006–2015 106
6.2 Distribution of prime-time variety shows sources on MediaCorp
Channel U, 2006–2015 106
8.1 Share of GDP and box office in selected countries
and regions in 2017 132
8.2 Average attendance in the sample cities (2010–2016) 134
8.3 Actual and Predicted China’s mainland Film Box Office from
January 2012 to December 2020 (predicted values after
October 2017) 139
Tables
3.1 umber, Box Office and Proportion of Box Office of Imported

N
Films in China from 1994 to 2017 32
3.2 Top Box Office Films of the Year in China’s Mainland Film
Market (1995–2017) 35
3.3 The Most Acclaimed and Highest-Grossing Chinese Films and
the Highest-Grossing Standard Chinese (Putonghua) Films in the
United States 41
3.4 Top 10 Global Box Office in 2017 and Its Ranking in North
American Film Market 43
4.1 Number of Chinese U.S. Films Shown in China with Chinese
Cultural Elements 50
4.2 North American Box Office and Growth Rate, 2005–2017 58
4.3 Share of Overseas Box Office of American Films in 2017 59
4.4 Top 20 Highest-Grossing Foreign Films That Include Standard
Chinese (Putonghua) 59
4.5 Some Information About Hollywood Films with Chinese Cultural
Elements 60
4.6 Information About Some Popular Chinese Movies 66
5.1 Countries Where China Has Become the Largest Source of
Tourists 83
6.1 Prices of One-Hour Imported U.S. TV Series on Different
National TV Stations (2004) 97
6.2 Top 10 Countries and Regions in World TV Advertising Market
(2013–2014) 98
6.3 Program Production Costs of Energy Pictures from 2011 to 2013 99
6.4 Cultural Distance of Countries and regions from the United States
(from far to near) 100
6.5 Structure of Broadcasting Hours and Sources of Variety Show
Programs on MediaCorp Channel U from April 1 to 14, 2006–2015 105
6.6 Hours of Prime-Time Variety Programs by Source on MediaCorp
Channel U from April 1 to 14, 2006–2015 107
6.7 China’s Mainland Variety Shows Broadcast on MediaCorp
Channel U from April 1–14, 2012–2015 108
x Tables
6.8 hinese variety shows that achieved excellent ratings on

C
Singapore’s Channel U, 2012–2014 109
8.1 Description of Sample Data 133
8.2 Results of Regression Analysis (Dependent Variable: Logarithm
of Movie Box Office) 135
8.3 Regression Results After the Interaction Variable of Number of
Theaters and Year 136
8.4 Regression Results Using Data from 2015 to 2016 137
8.5 Estimation Results of the AR(5) Model 138
8.6 China and North America’s Box Office and GDP Share of the
World (2004–2017) 140
8.7 Box Office Index of the Top 20 Countries and Regions in the
World in Terms of Total Domestic Box Office, 2013–2017 141
8.8 China and North America Film Box Office Forecast 142
9.1 China’s Film Box Office Share of Global Film Box Office from
2006 to 2016 153
9.2 Box Office of the Film Wolf Totem (Lang Tu Teng) in Countries
around the World 156
Preface
Economic globalization is affecting more and more countries and more and more
industrial fields, including cultural industries, in an unstoppable trend. At the same
time, China’s economy has entered a stage of high-quality development, the con-
struction of socialism with Chinese characteristics has entered a new era, and the
principal challenge facing Chinese society has evolved into that between unbal-
anced and inadequate development and the people’s growing needs for a better life.
In this context, it is important to study the development strategy of China’s foreign
cultural trade, which on the one hand can help meet the growing needs of the
people for a better life, and on the other hand can help enhance China’s “cultural
confidence”, which is also closely related to the “cultivation of new advantages in
foreign trade” mentioned in the 13th Five-Year Plan of the national economy.
The study of cultural trade issues also has important theoretical implications.
Compared with other products, the production and trade of cultural products have
distinctive features. The production of cultural goods has significant economies of
scale, and consumption of them has network externalizations. On the one hand,
it makes the target market of cultural products expand globally, and on the other
hand, it is particularly prone to the phenomenon of “winner takes all”. Countries
with large domestic markets have the opportunity to create a “home market effect”
under certain conditions, and the size of the local market becomes an advantage
in promoting the global spread of local culture and the export of national cultural
products. In contrast, the culture of small countries is easily ignored, and the cul-
tural industry of small countries has no advantage in this case.
In this context, the issue of cultural trade in China becomes a unique and
interesting subject of study. China’s rapid economic growth is driving the coun-
try’s rapid development from a small cultural market to a large cultural market.
But at the same time, China is still a middle-income country, and if China’s income
level can continue to rise, then China’s cultural industry still has a relatively large
potential. Due to the special national conditions of “middle income per capita”
and “second largest in total”, China is likely to be able to enjoy both “comparative
advantage” and “home market effect” in the development of its cultural industry.
China can assume some comparative advantages in the process of global produc-
tion of cultural products, while China’s huge domestic market size can support
larger-scale investment. Cultural products targeting a global audience will also add
xii Preface
“Chinese cultural elements” to reduce the “cultural discount” in order to win the
Chinese market, which promotes Chinese cultural elements to the world. Consider-
ing that China is the world’s most populous country, it is the only country in the
world that has such a feature.
Based on the above theoretical and practical backgrounds, this book hopes to
provide theoretical and empirical interpretations of some phenomena in the devel-
opment of China’s cultural industry, using the film and television industry as the
major cases, and to make some suggestions on the path of China’s development of
foreign cultural trade. The book hopes to explain some practices that have already
taken place; it also hopes to bring some inspirations and reflections on some sug-
gestions that are still not done enough in practice. Overall, the book argues that
China is the country best positioned to take full advantage of the opportunities of
globalization, to develop its cultural industry in a leapfrog manner.
The structure of this book is as follows:
The first chapter introduces the background and significance of the topic selec-
tion of this book.
The second chapter introduces the research progress of cultural trade and points
out the theoretical basis of this book. The results of most studies show that free
trade will reduce cultural diversities in the world. The cultural forms produced
by big countries will occupy a dominant position, while the cultural forms gener-
ated by small countries will gradually decline or even disappear completely under
certain conditions. The existence and variety of cultural forms in small countries
depend on the relative economic size of big countries, the cultural differences
between big countries and small countries, the communication cost between the
two countries and the degree of network externalities of product consumption. The
larger the relative economic size of a big country, the smaller the cultural differ-
ences between the two countries, the lower the communication cost between the
two countries, and the stronger the network externalities of product consumption,
the fewer cultural product styles in small countries, which will disappear to zero at
a certain critical point. Of course, not all the production in big countries is derived
from their own cultural forms, and not all the production in small countries is de-
rived from the cultural forms of small countries. The theoretical study of cultural
trade has many practical guiding significance for the development of China’s cul-
tural industry and cultural trade.
Starting from the third chapter of this book, we take film and television indus-
tries as the major cases to make a more detailed analysis and research on several
parts of China’s foreign cultural trade development strategy proposed at the end of
this book.
The third chapter analyzes the impact of the opening of Chinese film market on
the development of China’s film industry. By analyzing the development process of
Chinese film industry, we find that opening to the outside world has played multi-
ple important roles in the development of China’s film industry, which is embodied
in seven aspects: market expansion effect, competition effect, capital source effect,
demonstration effect, technology spillover effect, system reform promotion effect
and cooperation effect. We believe that under reasonable institutional arrange-
ments, further opening up film market will not lead to the “collapse” of domestic
Preface xiii
films, and the Chinese film market should start from protecting “Chinese cultural
elements” and promoting “Chinese cultural elements going out” for the next step
of opening up, as well as gradually liberalizing the distribution rights of imported
films and increasing the proportion of imported films.
The fourth chapter takes the film industry as a case to analyze the influence
of Chinese cultural trade import on Chinese culture going out. We believe that at
the current stage, the Chinese cultural trade import can play an important role in
Chinese culture going out. The viewpoint of this chapter is inconsistent with the
“conventional” viewpoint. The author does not deny that Chinese culture going out
ultimately depends on the export of Chinese cultural products, but at the same time,
the author also believes that at this stage, China can attract Hollywood movies to
add Chinese cultural elements by opening up its market to realize the efficient dis-
semination of Chinese cultural elements in the world.
In the fifth chapter, in order to better explain the potential advantages of Chinese
cultural products in the Chinese market, we demonstrate the favorable conditions
created by China’s economic rise for the international dissemination of Standard
Chinese (Putonghua) from the perspective of international dissemination of lan-
guages. This chapter aims to show that China’s economic rise has played a decisive
role in enhancing the international influence of Standard Chinese (Putonghua), and
the promotion of the international influence of Chinese provides a very important
foundation for the export of China’s cultural products and the promotion of the
global influence of Chinese cultural products.
The sixth chapter takes a new phenomenon-international trade of TV formats as
an example, analyzes the trend of specialization and refinement of division of labor
in the process of globalization of cultural industry and points out its significance to
China’s cultural industry and cultural trade. What we want to explain is that China
has unique national conditions, which makes it the country with the best conditions
to make full use of the opportunity of specialization and refinement of division of
labor in the process of globalization, and promote the leap-forward development of
cultural industry and trade. China’s TV program industry can use the world’s most
advantageous resources for its own use in the trend of globalization, and rapidly
enhance the international influence of Chinese TV programs.
In the seventh chapter, we take the film industry in Hong Kong, a Chinese film
production center with important influence in the world in 1990s, as an example.
On the one hand, it empirically verifies the core viewpoints of cultural trade theory;
on the other hand, it hopes to explain the rise and fall of Hong Kong film industry
by using the theoretical framework of cultural trade, so as to provide enlightenment
for the development of China’s mainland film industry. We believe that the glory
of Hong Kong films in the 1990s was due to the fact that its advantages in supply
conditions and trade cost conditions offset its disadvantages in demand. When its
advantages in supply conditions and trade cost weakened, its disadvantages in de-
mand began to appear and eventually led to the decline of the industry. The case of
Hong Kong film industry proves the importance of local market size and trade cost
to a region’s film culture trade. China’s mainland’s advantages in local market size
provide flexible adjustment space for the cultivation of its supply conditions and
the government’s industrial and trade policies.
xiv Preface
The eighth chapter is the influencing factors and predictions of the box office
size of Chinese film market and indicates the development strategies of China’s
movie industry in the new era. This chapter hopes to explain that China will be-
come a real “big power” in the field of cultural trade in the near future. Using
econometric methods, we predict that the box office size of Chinese film market
will surpass that of the United States to become the world’s largest by 2023, and
then China will become a real film “big power”, laying a very important foundation
for Chinese films to exert home market effect to promote exports.
The ninth chapter is the conclusion part of this book, which, based on the theo-
retical foundation of the book and combined with the arguments in various parts
of the previous chapters of the book, makes recommendations on China’s strategy
for developing foreign cultural trade in the era of globalization. We believe that
China’s domestic cultural market is huge, which has laid the most critical “lo-
cal market foundation” for China’s development of foreign cultural trade exports.
The development of China’s Internet industry plays an important role in expanding
the market size of cultural industries. The “market increment” it provides has af-
fected or even changed the market structure of some cultural industries in China
to a certain extent, which is very conducive to the promotion of the competitive-
ness of related cultural industries. The deepening of global division of labor and
specialization of cultural industry provides an important opportunity for China to
make better use of global resources and rapidly develop China’s cultural indus-
try. The promotion of Chinese language and Chinese cultural influence provides a
very good opportunity for the export of Chinese cultural products. The low mar-
ginal cost of cultural industry production helps to cultivate cultural trade exports.
Chinese cultural enterprises going out provides opportunities for Chinese cultural
industries to establish overseas distribution and release channels. China’s domes-
tic cultural industry has turned to a high-quality development stage, which makes
domestic enterprises realize that export is a rational choice. Under these opportuni-
ties and favorable conditions, China should rely on the domestic market, absorb
global resources to produce cultural products for the Chinese market and promote
the export of cultural products with “home market effect”. Various forms of coop-
eration should be carried out with various countries to produce cultural products
that conform to the cultures of the two countries. It is necessary to give full play
to the new opportunities in the process of globalization of cultural industries, bet-
ter introduce, digest, absorb and re-innovate, gather global resources to produce
cultural products and enhance export capacity. It is of great significance to make
full use of the opportunities brought by the Internet and emphasize the integration
of advanced technology and traditional culture. When conducting foreign cultural
trade, enterprises should follow the market rules, arrange export priorities with ref-
erence to cultural distance, carry out discriminatory pricing according to the char-
acteristics of cultural products, and cultivate local people’s preference for Chinese
cultural products. In line with the rapid development of the international spread of
Standard Chinese (Putonghua), the spread of language and culture will drive the
export of cultural products. Finally, the government can promote China’s cultural
trade export by signing agreements and holding related activities.
Acknowledgments
First and foremost, I would like to express my gratitude to my doctoral supervisor

Professor Jiang Xiaojuan. It is her spirit and dedication in her research for many
years that has been influencing and encouraging me to love the work and research
I am engaged in. It is also her work for many years that have continuously brought
me research inspiration. Thanks also go to Vice President Li Xiaomu of Beijing
International Studies University, he pointed out to me many years ago that cultural
trade is such an exciting research field, which has brought me a lot of joy during
my research in recent years. I would like to thank all my colleagues in the School
of Economics at Beijing International Studies University for their communication
and inspiration. I also want to thank my wife Ms. Kang Lu and my daughter Luo
Kangqi for their support and help in my work.
In the process of writing this book, there were many documents, information
and data that needed to be searched and processed. In addition to my own effort,
my postgraduate students made important contributions in this process, without
them, this book could not be completed. They are Ge Yali, Liu Sili, Yu Fangji, Zhou
Han, Lu Lan, Yu Peifang and Wang Muxin.
Please correct any inappropriate points in this book, and I hereby thank you in
advance.
Luo Libin
December 7, 2022
1 An Introduction
Why Do I Write This Book?
1.1 Background and Significance of This Book

The purpose of this book is to study what strategies China can adopt to develop
foreign cultural trade more efficiently under the background of globalization, con-
sidering China’s unique national conditions and the economic attributes of cultural
products. This study is based on the following backgrounds.
1.1.1 International Background: Globalization Deepens to the Field of

Cultural Industry
Since the 1980s, globalization has become one of the most important forces to
promote sustained growth of global economy. Productive factors have been mov-
ing across national boundaries to seek the optimal way of allocation, which is the
internal driving force for the emergence of globalization. Both theories and prac-
tices can prove that the internal motive force of globalization is strong enough to
be deepened into more and more fields of economy and society. Cultural industry
has also been involved in this tide of globalization.
The fundamental motivation of cultural industry globalization lies in some key
economic attributes of cultural products. The production of cultural products has
substantial scale economy effect, and consumptions of them has obvious effect of
network externalities; the combination of the two important economic attributes
determines that cultural products break through national boundaries for production
and consumption, which will bring benefits to producers and consumers respec-
tively. Once the barriers to globalization of cultural industries in terms of policies,
national culture and technology drop, globalization of cultural industries inevitably
becomes an irreversible trend.
The production of cultural products enjoys very significant economies of scale
effect, so expanding target market size becomes major area of competition among
producers, which results in the fact that cultural market will break through n ational
boundaries and become a global one. Taking the film and television industry that
this book focuses on as an example, at present, almost all movies invested by
Hollywood in the United States are aimed at the global market and are shown
simultaneously in dozens of countries and regions around the world. In the field
DOI: 10.4324/9781003424796-1
2 An Introduction: Why Do I Write This Book?
of TV programs, there is also a phenomenon that a large number of American TV

programs are exported to other countries and regions in the world. This phenom-
enon of one-way flow has always attracted the attention of both academia and
industry, and some countries have to require exception clauses in WTO rules to
prevent American cultural invasion. Because European TV program producers do
not have an advantage in competition with the powerful finished TV programs in
the United States, they developed “TV formats” to separate it from the finished TV
programs and become a separate tradable product for export to the United States as
well as other countries and regions. The emergence of international trade in TV for-
mats can fully illustrate the great power of globalization. When the globalization of
finished TV programs is limited by factors such as “cultural security” and “cultural
exception” and cannot make any progress, those “neutral” elements with “weak
cultural color” within the finished program are pulled out to form “TV formats”,
bypassing the obstacles of “cultural security” and “cultural exception” and real-
izing globalization. The force behind this is the demand of suppliers to pursue the
global market to enjoy the benefits of scale economy of cultural products. At pre-
sent, the most popular TV format in the world has been authorized to and l ocalized
in more than 100 countries around the world.1 Some traditional cultural products
with slow productivity improvement have also begun to pursue the global market
with the help of new technologies. For example, since 2009, the British National
Theatre has developed NTLive products, and broadcasts its drama works to the
whole country and even the whole world through live TV broadcast. As of May
2017, the British National Theatre has produced more than 50 NTLive plays and
recorded and screened NTLive works in 1,500 places in 45 countries around the
world, with a cumulative audience of more than 3 million people. NTLive entered
China for the first time in 2015, and it was hard to get a ticket of Frankenstein due
to its popularity. At present, NTLive is shown in 39 theaters in more than 20 cities
in China.2 In addition, some famous stage performance works have also been copy-
righted abroad to produce localized versions of various countries.
At the demand side, international experience shows that after national income
reaches a certain level, service consumption structures of various countries
converge. It is this convergence of “service consumption tastes” that enables mul-
tinational cultural enterprises to adopt standardized technologies to provide the
same services to global customers. Consumers’ taste of culture also has common-
alities.3 However, the consumption of cultural products is considered to have a
prominent feature of “network externality”, which is because the consumption
of cultural products is considered to have a certain “social function”.4 Research
shows that the decline of communication costs in the era of globalization makes it
easier for the influence of this network externalities to cross national boundaries
and promote the global convergence of cultural service consumption.5 As of April
2018, in the total box office of Hollywood’s top 15 film series, overseas proportions
all exceeded 50 percent.
Among the top 20 films in China’s box office rankings in 2017, 11 were im-
ported films, of which 10 are American films, and one is an Indian film. In the field
of TV programs, although almost all countries have implemented a local program
An Introduction: Why Do I Write This Book? 3
share system, globalization still permeates in various forms. First, the develop-
ment of online video industry has brought a new platform for overseas program
broadcasting. According to incomplete statistics, as of April 3, 2018, the num-
ber of American dramas that can be seen on the two major Chinese online video
platforms—Tencent video and Youku video—are 527 and 1,050, respectively,
Korean dramas are 167 and 922, English dramas are 195 and 190, Thai dramas are
21 and 215, and Japanese dramas are 167 and 575. Among the top 100 TV series
hits on another Chinese online video platform—Sohu video, there are 5 American
TV series, 3 Korean TV series and 1 Thai TV series. In this environment, China’s
online dramas are facing global competition from the very beginning, which is also
an important reason for the emergence of domestic dramas such as “Day & Night”
(Bai Ye Zhui Xiong), which is planned to be screened in 190 countries and regions
after being exported to Netflix.com. In addition, the development of international
trade in TV formats also makes the programs with global formats and localized
content welcomed in the world. An econometric study conducted in this book
shows that from 2012 to 2016, the introduction of TV formats has significantly in-
creased the online click-through rate of Chinese variety shows, while another study
shows that the introduction of formats has greatly enriched the types of Chinese
variety shows.
The same situation has happened in the field of digital music. Although local
pop music has advantages in the competition due to important influences of lo-
cal language and local market size, international music also has a large market
in various countries in the world. Taking QQ Music, a famous digital music sales
platform in China, as an example, as of April 3, 2018, among the top 20 best sellers
of QQ music digital music, there are works by purely local stars such as Chris Lee,
Taiwanese singers such as Jay Chou, Chinese singers such as Lu Han, LAY who
first became famous in Korean pop music, but also Korean music works such as
BIGBANG and G-Dragon, as well as American singers such as Taylor Swift. This
situation also appears in the list of popular singers.
In summary, the driving force of globalization continues and it has far-reaching
influences. Economic attributes of cultural industry in terms of production and con-
sumption determine that it will not only be affected by globalization but also be
affected in a deeper, lasting and irreversible way. Almost all countries will inevita-
bly participate in the wave of globalization, and different countries have different
advantages during that process.6
1.1.2 Backgrounds Related to China
1.1.2.1 Chinese Cultural Industry Is Faced with a Time of Opportunity

First of all, development of cultural industry is conducive to better facing the prin-
cipal challenge facing Chinese society in the new era. General Secretary Xi Jinping
pointed out in the reports of the 19th National Congress of the Communist Party of
China that the construction of socialism with Chinese characteristics has entered a
new era, and the principal challenge facing Chinese society has evolved into that
between unbalanced and inadequate development and the people’s growing needs
for a better life. However, at the same time, he also emphasized that China is still
in the primary stage of socialism, and “liberating and developing social productive
forces” is the essential task of socialism.
We believe that there are still important opportunities and space for economic
development in the process of solving the principal challenge, but compared with
the past, China’s economy will change from a high-speed growth stage to a high-
quality development stage, and the focus of people’s demand focus will experience
a relocation from availability to quality, diversity and spiritual pleasure. In this
process, the output increment to be provided by the supply side is mostly related
to the service industry, and the cultural industry will be a very important part. For
example, the improvement of product quality and the satisfaction of diversified
needs require research and development, design, and brand-related services, while
the satisfaction of spiritual pleasure needs requires tourism, entertainment, culture,
sports and other services. It can be predicted that the proportion of cultural service
industry in China’s economy will continue to rise in the future.
Second, the cultivation of new economic advantages of China’s “local market
size” in the new era provides favorable conditions for the development of cultural
industries. In the new era, the advantages of China’s economic development be-
gan to change. In 2017, China’s per capita GDP reached 59,000 RMB, exceeding
8,800 US dollars. China’s advantage of low-cost labor gradually weakened, but at
the same time, China’s GDP exceeded 80 trillion RMB, equivalent to more than
13 trillion US dollars, ranking firmly in the position of the world’s second-largest
economy. The expansion of economic aggregate size has brought a “local market
advantage” of huge domestic market size. This change of advantage means that
China’s economic structure will be more and more inclined to develop fields with
more obvious economies of scale, including R&D, design, branding, entertain-
ment, sports and other industries with higher “creative content” or “intellectual
property content”.7 China’s huge domestic market is especially conducive to the
cultural industry to give full play to its economies of scale in China, thus promot-
ing its growth.
Third, the new changes on the supply side provide new opportunities for the
development of cultural industries. In this book, we emphasize the supply-side rev-
olution brought by Internet technology to the development of cultural industry. The
Internet, especially the mobile Internet, has greatly expanded the way cultural and
recreational activities are provided. On the one hand, it has greatly improved the la-
bor productivity of cultural industries and reduced the production and distribution
costs of cultural products; on the other hand, it has greatly expanded the cultural
market space. When the cultural industry changes from the traditional “peer-to-
peer” and “face-to-face” inefficient service industry8 to one in cyberspace, its pro-
duction efficiency experiences a revolutionary leap. Changing from stage live art
to TV, film and media is a leap in improving the productivity of cultural and en-
tertainment industry, which expands cultural and entertainment activities from the
earliest point-to-point to point-to-many points, and greatly improves the economies
of scale. However, the development of Internet and mobile Internet technology has
fundamentally changed some basic characteristics of TV and movie media in time

and space. Audiences can watch performances anytime and anywhere, and the size
of the audience they can reach is greatly expanded.9 In a word, Internet technology
is revolutionary for the improvement of the production and provision efficiency of
cultural industries.10 In the field of mobile Internet content, especially in the field
of culture and entertainment, China is doing a good job even in the world,11 which
provides a unique technological environment for the development of cultural in-
dustry in China.
Fourth, the development of cultural trade in the new era is of great significance
for changing the growth model of foreign trade. On March 3, 2014, the State
Council issued the Opinions on Accelerating the Development of Foreign Cultural
Trade, affirming the significance of developing foreign cultural trade, which points
out that accelerating the development of foreign cultural trade is of great signifi-
cance for expanding China’s cultural development space, improving the quality of
foreign trade development, continuing to expand reform and opening up, chang-
ing the economic development model, stabilizing growth, promoting employment
and benefiting people’s lives, enhancing the country’s soft power and completing
the building of a moderately prosperous society in all respect. We believe that the
above judgment is put forward under the circumstances that China’s foreign trade
is facing a new situation, facing the arduous task of transformation and upgrading,
and is in urgent need to cultivating “new advantages”. The development of foreign
cultural trade is closely related to “cultivating new advantages of foreign trade with
technology, standards, brand, quality and service as the core”.12 Cultural industry is
regarded as an intelligence-intensive industry with the characteristics of environ-
mental protection, low energy consumption and high-added value. Developing for-
eign cultural trade means that China will change the previous model of indirectly
exporting low-cost labor through trade, and instead use foreign trade as the carrier
to indirectly export relatively high-end production factors, laying the foundation
for higher remuneration of production factors, which is an important channel to
change the growth model of foreign trade. In addition, the development of for-
eign cultural trade is to improve the spread of Chinese culture through commercial
means, which may play a subtle and important role in the image publicity, brand
building and standard establishment of other industrial products in China.13
To sum up, no matter from the supply side or the demand side, the cultural
industry is facing vital opportunities for the development in China. At the same
time, the state has also issued a series of policies to promote the development of
cultural industries. For example, in the 13th Five-Year Plan, “cultural industries be-
come pillar industries of the national economy”14 and “the international influence
of Chinese culture continues to expand”15 are clearly regarded as important goals.
1.1.2.2 China’s Unique National Conditions Under the Background of

Globalization: Possibility of Gathering Global Resources
Under the background of globalization, China has unique advantages in enhanc-

ing its cultural soft power by developing trade in cultural services, because China
has the unique special national conditions of middle levle in per capita GDP and
second largest in total GDP.16
In 2010, China’s GDP surpassed Japan and became the second-largest econ-
omy in the world. Even at the middle-income stage, China has already become
one of the largest economies in the world. In terms of purchasing power parity,
since 2014, China’s GDP has surpassed that of the United States and jumped
to the top in the world. Even in terms of exchange rate, China is currently the
second-largest economy. However, at the same time, according to the standards
of the World Bank, China is still a middle-and upper-income country. In 2017,
China’s per capita GDP was 8,836 USD, which is 82 percent of the world aver-
age.17 China is the only economy in the world that has the characteristics of both
middle level in per capita GDP and second largest in total GDP, which is deter-
mined by the unique national conditions of being world’s most populous country
(see Figure 1.1).
The middle level in terms of per capita GDP shows that China still has potential
for upgrading its industrial structure, and there is still room to make use of the
advantages of backwardness and absorb the advanced experience and technology
of the first-mover countries to accelerate its development, which is a condition
that developed economies do not have. As one of the industries with relatively
high-income elasticity, cultural industry has been relatively mature in developed
countries. Therefore, the relevant experiences, advanced models and technologies,
advanced human capital and system design of developed countries can provide
valuable experiences for the development of China’s cultural industry. In the devel-
opment of cultural industry, China has the late-mover advantages.
Figure 1.1 National income per capita in 1965 and 2016.

“The second largest in total GDP” means that China has great market attraction,
which is a condition that other small countries (economies) in the middle-income
stage do not have. Especially in recent years, China’s domestic demand has stead-
ily expanded, and the contribution rate of consumption to economic growth has
reached 58.8 percent; the urbanization rate of the resident population reached 58.52
percent, an increase of nearly six percentage points over five years ago. China
already has the largest middle-income group in the world, forming a huge domes-
tic market. If one of China’s greatest advantages at the beginning of the reform
and opening up is the low-cost labor force that is difficult to move internationally,
China’s greatest advantage in the new era is its huge domestic market size. It helps
China to produce “home market effect” on industries with obvious economies of
scale and attract high-quality resources from all over the world. Cultural services
such as film and television, education, intellectual property rights and advertising
all have the characteristics of obvious economies of scale. The huge Chinese mar-
ket is very helpful for China to attract the world’s best resources in the field of cul-
tural industry, to take China as the production center, focus on Chinese as the target
market, produce cultural products with Chinese cultural elements and radiate to the
whole world. According to the survey results released by Hong Kong and Shang
Hai Banking Corporation (HSBC Group) at the end of 2015, China’s mainland
became the most attractive place to emigrate in the Asia-Pacific region in 2015.
Sixty-eight percent of the foreign talents working in China’s mainland surveyed
said that working in China could earn higher disposable income than their original
place of residence, followed by Hong Kong, Singapore, India, Australia and New
Zealand. The favorite jobs of foreign talents in China are education (accounting for
1/4), followed by marketing (12 percent) and manufacturing (11 percent). Global
migrants earn the highest salary in the Asia-Pacific region, with an average annual
income of 126,500 US dollars.
Because it has the two key characteristics—middle level in per capita GDP and
second largest in total GDP— and faces the external environment of globaliza-
tion, China can be said to be a country with the advantage of placing emphasis on
China, absorbing everything and anything in the world. Therefore, China should
make full use of the opportunity of globalization, “not forgetting the origin, absorb-
ing foreign countries’ resources and facing the future”18 and promote the leapfrog
development of cultural industry and cultural service trade.
1.1.3 Theoretical Background
1.1.3.1 Particularity of Cultural Industry Brings a New Point for the Study of

Traditional Problems
The relationship between opening up, industrial development and international
trade is an important topic in industrial economics and international trade research,
which has produced a large number of theoretical and empirical studies. However,
the cultural industry itself has certain special industrial attributes, which makes the
research on the opening of cultural industry have special significance.
First of all, the cultural industry has attributes of both culture and industry.
Cultural products have both economic value and cultural value dimensions.19 The
coexistence of “economies of scale in production” and “network externalities of
consumption” in the core cultural industry makes it have the characteristics of
“winner takes all”, which means that small countries may face cultural security
problems after the opening of cultural industries. The “demand orientation” of
“cultural element input” in the production of cultural industry results in a compli-
cated relationship between its cultural input and the place where culture products
are produced. The cultural products produced by a country do not necessarily focus
on its own cultural values but are likely to meet the demand. The above character-
istics of the cultural industry make the research on the opening up of the cultural
industry face some special, interesting and significant problems. For example, is
the opening up of the cultural industry conducive to the development and competi-
tiveness enhancement of local cultural industries? And then what influence does
it have on the international dissemination of national culture and cultural security
in home countries? The first problem is the “conventional” proposition of indus-
trial economics and international trade research, but the characteristics of cultural
industry make this problem have new research significance. The second problem
is the “new” problems faced by the cultural industry opening up to the outside
world. The research on this problem can enrich the theories in the field of industrial
opening research and can provide theoretical research increment for both economic
research and communication research.
For some of the problems raised above, some theoretical studies have given
some explanations. The studies focus on the characteristics of economies of
scale and network externalities of cultural products, and make theoretical mod-
els of cultural trade liberalization and draw some conclusions. Most of these lit-
eratures believe that the impact of cultural product trade liberalization on welfare
is destructive or that protection of cultural product trade under certain circum-
stances is welfare-enhancing. For example, the study of Francois and van Ypersele
shows that tariffs on cultural products are welfare-enhancing under the follow-
ing circumstances: there are significant economies of scale in product production,
and the preferences of trading countries are strongly heterogeneous.20 Janeba used
Ricardian model, assuming that returns to scale is constant, and the consumption of
cultural products has positive network externalities.21 His research shows that com-
pared with a closed economy, free trade will reduce a country’s welfare because
trade changes the price of online products, people can turn to imported online prod-
ucts, thus worsening the consumer welfare of domestic cultural products, because
the price and user base of domestic cultural products have deteriorated. Rauch and
Trindade combine the network externalities of consumption with the economies of
scale of production.22 Their paper show that in a model of differentiated cultural
products produced by two countries, if the cultural discount is not too large, but the
market size difference between the two countries is large enough, then the cultural
products of small countries may disappear. Therefore, cultural globalization will
strengthen the home market effect in the standard Helpman-Krugman trade model.
The intensification of cultural globalization or the decline of cultural discount
will reduce the number of styles of cultural products and lead to stronger network
externalities. At the same time, the quality of future cultural products will decline,
because it depends on the number of cultural product forms currently existing in
the two countries in the model. Bala and Van Long study how the relative scarcity
or abundance of cultural products and the resulting price level make people form
preferences between generations.23 Their research shows that under the condition
of closed economy, a big country and a small country have different and relatively
stable preferences. If free trade is carried out, the preferences of small countries
will “disappear”. Small countries will gradually lose their cultural identity. In other
words, trade can lead to the loss of cultural diversity. Olivier et al. propose a dy-
namic approach to explain the evolution of preferences under social mechanisms in
which cultural identity is seen as something with group externality.24 People’s en-
counters and acquaintances are random, and they can bring utility when they know
people with the same cultural background. Their research assumes that the return
to scale of production is constant, so its transmission channel does not have the
following characteristics: the dominant economy or culture after the unification of
the market can provide its cultural products at a lower cost, thus making the results
biased toward “corner solution”. Olivier et al. show that factor endowment would
affect people’s preference for cultural products in the long run—people will have a
preference for products that produce abundance.25 They show that trade integration
will lead to more cultural differences among different countries. On the contrary,
social integration will lead to more interaction between people in different coun-
tries, which will lead to cultural integration, because the cultural distribution of
different countries becomes more similar.
There are also some important literatures that discuss the relationship between
cultural industry protection and cultural protection and emphasize the differences
between them. Mas-Colell divides the protection policies in the field of cultural
products trade into two categories: one is to protect the production of domestic
cultural products; while the other is to protect the national culture of domestic
production.26 The author thinks that there is a great difference between the two:
the first focus is on protecting domestic production and employment in the field
of cultural industries, which is difficult to distinguish from other non-cultural in-
dustries such as shoe making and automobile assembly; the second focus is on
the protection of content related to national culture, such as a country’s language,
historical stories, clothing and cultural traditions. He believes that the cultural trade
protection policies of many countries actually support the first type of protection
on the grounds of the second type of protection. Following this line of thinking,
Rauch and Trindade discuss the relationship between these two types of protection
in more detail and consider that the protection of domestic production of cultural
products through trade policies may not always protect the country’s culture.27 For
example, under the background of falling international communication and com-
munication costs, since the consumption of cultural products has “network exter-
nalities” and “economies of scale” in production, the trade protection policy may
lead to the following situation: although the production process of cultural products
is at home, its content and form are abroad, and this protection is not conducive
to the improvement of the quality and welfare of cultural products worldwide,

because it reduces the diversity of cultural products worldwide. On the contrary,
if the policy of protecting “domestic cultural production and employment” can be
abolished and replaced by the policy of “protecting domestic culture”, it will help
to improve the welfare of the whole world. Richardson and Wilkie, taking the pop
music industry as an example, propose that a country’s domestic demand prefers
internationalized content, while domestic broadcasting has a policy restriction of
“domestic program broadcast share”, which will lead to the combination of “do-
mestic artists and internationalized content” and the policy of “local content quota”
will lead to the increasing “internationalization” of domestic music.28
The existing literature has the following characteristics. First, there are more
theoretical studies and fewer empirical studies on “cultural industry” as a whole.
The possible reason is that the statistical classification of cultural industry as an
industry is not perfect, and the unity of economic attributes of some industries
currently classified as cultural industry needs to be improved, which is not easy to
fit the hypothesis of the theoretical model. Second, there are few studies related to
China. Despite of many studies on cultural industry and cultural trade in China in
recent years, basic research based on the basic attributes of cultural industries and
trade is still relatively lacking. In May 2016, Mr. Luo Shugang, Minister of Culture
of China, also pointed out at the inaugural meeting of the Committee of Experts
on Cultural Industry of the Ministry of Culture that “basic theoretical research on
cultural industry is relatively weak at present”.29
However, for China, the guiding significance of the above-mentioned research
for practice is also obvious: the 13th Five-Year Plan of the national economy
explicitly includes “cultural industry as a pillar industry of the national economy”
and “continuous expansion of the influence of Chinese culture”30 in the chapter
of the main objectives of economic and social development during the 13th Five-
Year Plan period. In the process of achieving this goal, the opening of cultural
industry to the outside world is an important aspect that needs attention. For a long
time, due to its cultural characteristics, the opening to the outside world of the
cultural industry is constrained. At present, China is the second-largest economy
in the world with its economic development entered a “new normal” stage. The
demand and supply conditions of cultural industry development are facing impor-
tant opportunities. Considering characteristics of cultural industries, the external
opportunities of globalization and the “new normal” of China’s economic develop-
ment, it is of obvious practical guiding significance to study the impact of cultural
industry opening up to the outside world on China’s economy, the development of
cultural industry and the going out of Chinese culture under the “new situation”.
For example, what opportunities and challenges does the globalization of cultural
industries provide for the development of China’s cultural industries? What advan-
tages does China have in taking advantage of the opportunities of globalization?
How to take advantage of China’s advantages, seize the opportunity of globaliza-
tion to develop China’s cultural industries, promote the trade of Chinese cultural
products (including import and export) and promote the “going out” of Chinese
culture? How should industry and policy-making departments respond?
1.1.3.2 Case Studies on China Is of Great Significance
The reason why case studies on China are of great significance is that the status of
China’s economy and China’s cultural industry in the world is changing rapidly.
The rise of China’s economy is one of the most important events in the world
economy in the twenty-first century. From 2005 to 2016, the proportion of China’s
GDP in the world GDP increased from 4.86 percent to 14.91 percent, and the high-
est proportion reached 15.04 percent in 2015, with an average annual increase of
about 1 percent. In contrast, the economic proportion of developed countries has
declined, and the proportion of US GDP has dropped from 27.72 percent to 24.44
percent in the same period. The GDP share of the 28 EU countries decreased from
30.33 percent to 21.31 percent; Japan’s GDP share dropped from 10 percent to 6.44
percent. In the same period, the average annual growth rate of China’s per capita
GDP was 14.98 percent, that of the United States was 2.41 percent, that of Japan
was 0.35 percent, that of developed economies in the European Union was 0.97
percent and that of the world was 3.15 percent.31 From the perspective of cultural
industry, China has rapidly grown from a country with a small cultural industry to
one with a big cultural industry in a relatively short period of time, and its influence
on the global cultural industry has been and is still increasing rapidly. For example,
the total box office of Chinese film market accounted for only 0.7 percent of the
global box office in 2004, but it has increased to 19 percent by 2017. Although the
influence of Chinese films in the global market still needs to be improved, there
is no doubt that the influence of the Chinese market on the global film industry
will be improved.32 In the process of this rapid change, the government’s policies
on cultural industries and trade are also changing rapidly. Chinese culture has its
unique tradition and historical heritage. In other words, there is a cultural distance
between Chinese culture and that in America and European countries. China’s
economy, China’s cultural industry and trade policy can be said to be an excellent
case of studying cultural economy on a global scale. The research conclusions
about China’s cultural industry and trade should have the important theoretical
significance for the development of the whole cultural economy.
Moreover, there are many disputes about China’s cultural industry and trade,
such as opening up to the outside world, making full use of the opportunities of
globalization and utilizing two markets and two resources, which is considered to
be an important reason for the sustained, rapid and healthy development of China’s
economy since the reform and opening up.33 But can this strategy be applied to
the development of cultural industry? There are also debates on how globalization
affects cultural diversity. Some views hold that globalization has swept the main-
stream standardization style across the world and destroyed local cultural identity
and cognition; however, another point of view is that it is precisely the impact of
globalization that makes many ethnic groups more aware of their cultural iden-
tity.34 These questions are also asked in China. For example, in recent years, the
mainstream public opinion theory has changed a lot in the basic attitude toward
the opening up of the cultural market; a representative view is that expanding the
opening of the cultural market to the outside world may impact China’s cultural
management pattern and endanger cultural security.35 Therefore, studying the

opening of China’s cultural industry and the development of cultural trade under
the background of globalization can provide some references for answering and
responding to the above questions.
To sum up, it is of great theoretical and practical significance to study the strate-
gic issues of China’s cultural trade development under the background of cultural
industry globalization.
1.2 Structure of the Book

The structure of this book is as follows:
The first chapter introduces the background and significance of the topic selec-
tion of this book;
The second chapter introduces the research progress of cultural trade and points
out the theoretical basis of this book. The production of cultural products has sig-
nificant economies of scale effect. Due to the differences between cultures in the
world, cultural distance becomes the cost of cultural trade. Therefore, cultural
trade is widely considered to conform to the hypothesis of home market effect in
Helpman and Krugman.36 On this basis, some scholars of cultural trade theory add
the “network externality” characteristics of cultural product consumption to the
model for research. The results of most studies show that free trade will reduce
cultural forms in the world. The cultural form produced by big countries will oc-
cupy a dominant position, while the cultural forms produced by small countries
will gradually decline or even disappear completely under certain conditions. The
existence and variety of cultural forms in small countries depend on the relative
economic scale of big countries, the cultural differences between big countries and
small countries, the communication cost between the two countries and the degree
of network externalities of product consumption. The larger the relative economic
scale of a big country, the smaller the cultural differences between the two coun-
tries, the lower the communication cost between the two countries, the stronger the
network externalities of product consumption, and the fewer cultural product styles
of small countries, which may even disappear at a certain critical point. Of course,
not all the production in big countries is derived from their own cultural origins,
and not all the production in small countries is derived from the cultural origins of
small countries.
We believe that the theoretical study of cultural trade has many practical guiding
significance for the development of cultural industry and cultural trade in China.
First, the size of China’s cultural industry is growing, and its gap with developed
countries such as the United States is narrowing. In other words, China is during a
process of transition from a small country in cultural industry to a big one. Second,
China has its own cultural tradition, which is different from the so-called “western
culture” and has a considerable cultural distance. Third, the cultural industry is
playing an increasingly important role in China’s economy. “The cultural industry
has become a pillar industry” and “the international influence of Chinese culture
continues to expand”37 have become important goals of the 13th Five-Year Plan.
Under the above background, how should China’s cultural industry develop in the
era of globalization? How to grasp the relationship between the development of
cultural industry and the international dissemination of Chinese culture? How to
grasp the relationship between the opening up and protection of cultural industry?
The literature of cultural trade theory and empirical research has inspired answers
to the above questions.
Starting from the third chapter of this book, combining with the theoretical basis
mentioned in chapter two and the national conditions of China, we take film and
television industries as the major cases to make a more detailed analysis and re-
search on China’s foreign cultural trade development strategies proposed at the end
of this book.
The third chapter analyzes the impact of the opening up of film market on the
development of China’s film industry. This chapter finds that opening up to the out-
side world has played an important role in the development of China’s film indus-
try, so opening up should become an important principle for the development of the
cultural industry. By analyzing the development process of Chinese film industry,
we find that opening to the outside world has played multiple important roles in the
development of China’s film industry, which is embodied in seven aspects: market
development effect, competition effect, capital source effect, demonstration effect,
technology spillover effect, system reform promotion effect and cooperation effect.
We believe that under reasonable institutional arrangements, further opening up the
film market will not lead to the “collapse” of domestic films, and the Chinese film
market should start from protecting “Chinese cultural elements” and promoting
“Chinese cultural elements going out” for the next step of opening up, as well as
gradually liberalizing the distribution rights of imported films and increasing the
proportion of imported films.
The fourth chapter takes the film industry as a case to analyze the influence
of Chinese cultural trade import on Chinese culture going out. We believe that
at the current stage, the Chinese cultural trade import can play an important role
in Chinese culture going out. The production of cultural products has significant
economies of scale effect and has the tendency of “maximizing the number of tar-
get audiences”, so the “cultural elements” contained in it have demand orientation.
Therefore, under the background of globalization, countries with huge market size
can promote global resources to produce products containing their own cultural
elements and sell them to the whole world through opening up, thus realizing the
international dissemination of their own culture. We believe that China is one of the
few countries with the above-mentioned big market advantages. Although it is the
ultimate goal to promote culture to go out through export, at the current stage of de-
velopment, it is the most realistic way to realize Chinese culture to go out through
“import” of cultural trade, and it is also a stage to achieve the ultimate goal. The
government should adjust its policy thinking, from focusing on the protection of
cultural industries to focusing on the protection of Chinese cultural elements, and
promote the “sinicization of global cultural products” by expanding opening up.
The point of view in this chapter is inconsistent with the “conventional” point of
view. The author does not deny that Chinese culture going out ultimately depends
on the export of Chinese cultural products, and at the same time, the author believes
that at this stage, China can attract Hollywood movies to add Chinese cultural ele-
ments by opening up its market to realize the efficient dissemination of Chinese
cultural elements in the world. Even one day, when China becomes one of the
important centers of the world film industry, the cultural elements contained in
Chinese film exports will be diversified.
In the fifth chapter, in order to better explain the potential advantages of Chinese
cultural products in the Chinese market, we demonstrate the favorable conditions
created by China’s economic rise for the international dissemination of Standard
Chinese (Putonghua) from the perspective of international dissemination of lan-
guages. This chapter aims to show that China’s economic rise has played a deci-
sive role in enhancing the international influence of Standard Chinese (Putonghua),
and the promotion of the international influence of Standard Chinese (Putonghua)
provides a very important foundation for the export of China’s cultural products
and the promotion of the global influence of Chinese cultural products.
The sixth chapter takes a new phenomenon—international trade of TV
formats—as an example, analyzes the trend of specialization and refinement of
division of labor in the process of globalization of cultural industry, and points
out its significance to China’s cultural industry and cultural trade. What we want
to explain is that China can make full use of the opportunity of specialization
and refinement of division of labor in the process of globalization and promote
the leap-forward development of cultural industry and trade. We believe that the
international trade of TV formats is an important embodiment of the specialization
and refinement of the global division of labor in the cultural industry. It provides
an extremely important opportunity for the development of TV program industry
in “late-coming countries” to introduce, absorb, re-innovate and realize leapfrog
development and also has an important impact on the pattern of global TV program
industry. More importantly, China’s special national conditions make it possible to
use the world’s advantageous resources for its own use in the trend of globalization
and rapidly enhance the international influence of Chinese TV programs.
In Chapter 7, we choose the film industry in China’s Hong Kong, a Chinese
film production center with important influence in the world in 1990s, as an ex-
ample. On the one hand, it empirically verifies the core viewpoints of cultural
trade theory, on the other hand, it explains the rise and fall of Hong Kong film
industry by using the theoretical framework of cultural trade, so as to provide en-
lightenment for the development of China’s mainland film industry. We believe
that the prosperity of China’s Hong Kong films in those years was due to the fact
that its advantages in supply conditions and trade cost conditions offset its dis-
advantages in demand. When its advantages in supply conditions and trade cost
weakened, its disadvantages in demand began to appear and eventually led to the
decline of the industry. The case of China’s Hong Kong film industry proves the
importance of local market size and trade cost to a region’s film culture trade. The
advantage of local market size in China’s mainland provides flexible adjustment
space for the cultivation of its supply conditions and the government’s industrial
and trade policies.
The eighth chapter examines the influencing factors and predictions of the box
office size of film market in China’s mainland and indicates the development strat-
egies of China’s movie industry in the new era. This chapter predicts that China
will become a real “big power” in the field of cultural trade in the near future.
Using econometric methods, we predict that the box office in China’s film market
become the world largest by the year 2023, and then China will become a real film
“big power”, laying a very important foundation for Chinese films to exert home
market effect to promote exports.
Chapter 9 is the conclusion part of this book, which based on the theoretical
foundation and combined with the arguments in some parts of the previous chap-
ters, makes recommendations on China’s strategy for developing foreign cultural
trade in the era of globalization. We believe that China’s domestic cultural mar-
ket is huge, which has laid the most critical local market foundation for China’s
development of foreign cultural trade exports. The development of China’s Internet
industry plays an important role in expanding the market scale of cultural indus-
tries. The market increment the internet provides has affected or even changed the
market structure of some cultural industries in China to a certain extent, which
is very conducive to the promotion of the competitiveness of related cultural in-
dustries. The deepening of global division of labor and specialization of cultural
industry provides an important opportunity for China to make better use of global
superior and rapidly develop China’s cultural industry. The promotion of Chinese
language and Chinese cultural influence provides a very good opportunity for the
export of Chinese cultural products. The low marginal cost of cultural industry
production helps to cultivate cultural trade exports through discriminatory pricing.
Chinese cultural enterprises going out provide opportunities for Chinese cultural
industries to establish overseas distribution and release channels. China’s domestic
cultural industry has turned to a high-quality development stage, which makes do-
mestic enterprises realize that export is a rational choice. Under these opportunities
and favorable conditions, China should rely on the domestic market, absorb global
resources to produce cultural products for Chinese market, and promote the export
of cultural products with home market effect. Various forms of cooperation should
be carried out with various countries to produce cultural products that conform to
the cultures of the cooperating countries. It is necessary to give full play to the new
opportunities in the process of globalization of cultural industries and do a better
job in introducing, digesting, absorbing and re-innovating, so as to gather global
superior resources to produce cultural products and enhance export capacity. It is
of great significance to make full use of the opportunities brought by the Internet
and emphasize the integration of science and technology and traditional culture.
When conducting foreign cultural trade, enterprises should follow the market rules,
arrange export priorities with reference to cultural distance, carry out discrimina-
tory pricing according to the characteristics of cultural products and cultivate local
people’s preference for Chinese cultural products. In line with the rapid develop-
ment of the international spread of Chinese, the spread of language and culture will
drive the export of cultural products. Finally, the government can promote China’s
cultural trade export by signing agreements and holding related activities.
Notes
1 For a more detailed description of the development of international trade in television
programming models, see Chapter 4 of this book.
2 The source of the data is the official website of the British National Theatre.
3 Jiang, Xiaojuan. (2008). Trends and Theoretical Issues of Globalization of Services.
Economic Research Journal, 2, 15.
4 The characteristics of “network externalities” in the consumption of cultural products
are explained and introduced in more detail in Chapter 2of this book.
5 Rauch, J. E. and Trindade, V. (2009). Neckties in the Tropics: A Model of International
Trade and Cultural Diversity. Canadian Journal of Economics, 42, 809–843.
6 This part of the background introduction to globalization draws more on the frame-
work of Jiang, Xiaojuan, “Economic Analysis of the Sports Industry,” CITIC Press,
May 2018, Chapter 9, and Jiang, Xiaojuan and Luo, Libin “Service Globalization in the
Network Era: Acceleration, New Engines, and Competitiveness of Big Powers,” forth-
coming in Chinese Social Sciences, 2019, No. 1.
7 “Creative content” and “intellectual property” are two key words in the academic defini-
tion of cultural industries, see David, Throsby, translated by Wang, Zhibiao and Zhang,
Zhengrong. (2015). Economics and Culture (1st edition). Beijing: China Renmin
University Press, p. 122.
8 For example, the traditional performing arts are a typical example of an inefficient
industry, unable to save human input or shorten human input time. One of the world’s
earliest and most influential economists on the economics of culture, William Baumol,
titled one of his masterpieces “Performing Arts: An Economic Dilemma”. See Zhou,
Zhengbing. (2016). A Review of William Baumol’s Ideas on the Economics of Culture.
Journal of Beijing Union University(Humanities and Social Sciences), 14(2), 56–61.
9 According to the 2018 China Internet Development Statistics Report released by the
China Internet Information Center, as of June 30, 2018, the number of Chinese Internet
users has exceeded 800 million, of which 788 million are cell phone users. The per
capita time spent online is 27.7 hours a week, of which 74.1 percent of Internet users are
watching short videos.
10 For a detailed discussion of the revolutionary impact of the Internet on the development
of cultural industries, see Jiang, Xiaojuan. (2018). Service Economy in the Internet Era:
China Steps into a New Stage of Development. China Social Sciences Press. and Jiang,
Xiaojuan. (2018). Service Industry in Cyberspace: Efficiency, Constraints and Pros-
pects for Development–Taking Sports and Cultural Industries as Examples. Economic
Research, 04, 4–17.
11 See McKinsey Global Institute, “China in the Digital Age: Building a Globally
Competitive New Economy,” Internet Data Center Website, http://www.199it.com/
archives/660330.html, accessed June 1, 2018; Jiang, Xiaojuan. (2018). Service Econ-
omy in the Internet Era: China Steps into a New Stage of Development. China Social
Sciences Press.
12 See Section 3, Chapter 10 of The 13th Five-Year Plan for Economic and Social
Development of the People’s Republic of China (2016–2020), http://www.gov.cn/
xinwen/2016-03/17/content_5054992.htm
13 For example, studies have shown that the worldwide distribution of U.S. films plays an
important role in the branding and communication of other U.S. industries. See Kery,
Segrave. (1997). American Films Abroad: Hollywood’s Domination of the World’s
Movie Screens from the 1890s to the Present, North Carolina. Mcfarland & Co Inc. Pub.
14 See Chapter 3 of The 13th Five-Year Plan for Economic and Social Development of
the People’s Republic of China (2016–2020), http://www.gov.cn/xinwen/2016-03/17/
content_5054992.htm
content_5054992.htm
16 For a more detailed discussion of this point, see Luo, Libin. (2018). How Can China
Transform the Middle-Income Trap into a Development Opportunity, Chinese Social
Sciences Net, April 7, 2018, https://mp.weixin.qq.com/s/XyQT0BpBzfa4zVf3NjYdog,
accessed on June 13, 2023.
17 Source: World Bank WDI database.
18 This sentence is translated from Chinese “不忘本来，吸收外来，面向未来”, which is
cited from the remark made by Xi Jinping on the Symposium on Philosophy and Social
Sciences on May 17, 2016.
19 David, Throsby. (2015). Economics and Culture. Beijing: China Renmin University
Press.
20 Patrick, Francois and Tanguy, van Ypersele. (2002). On the Protection of Cultural
Goods. Journal of International Economics, 56(2), 359–369.
21 Eckhard, Janeba. (2007). International Trade and Consumption Network Externalities.
European Economic Review, 51(4), 781–803.
22 James E., Rauch, et al. (2009), Neckties in the Tropics: A Model of International Trade
and Cultural Diversity. Canadian Journal of Economics, 42(3), 809–843.
23 Bala, Venkatesh and Ngo, Van Long. (2005). International Trade and Cultural Diversity
with Preference Selection. European Journal of Political Economy, 21, 143–162.
24 Olivier, J., Thoenig, M., and Verdier, T. (2008). Globalization and the Dynamics of
Cultural Identity. Journal of International Economics, 76(2), 356–370.
25 Olivier, J., Thoenig, M., and Verdier, T. (2008). Globalization and the Dynamics of
Cultural Identity. Journal of International Economics, 76(2), 356–370.
26 Mas-Colell, A. (1999). Should Cultural Goods Be Treated Differently? Journal of
Cultural Economics, 23(1), 87–93.
27 James E., Rauch and Vitor, Trindade. (2009). Neckties in the Tropics: A Model of Inter-
national Trade and Cultural Diversity. Canadian Journal of Economics, 42(3), 809–843.
28 Martin, Richardson and Simon, Wilkie. (2015). Faddists, Enthusiasts and Canadian
Divas: Broadcasting Quotas and the Supply Response. Review of International Eco-
nomics, 23(2), 404–424.
29 Su, Dandan (2016, 15 May). The Cultural Industry Expert Committee of The Ministry
of Culture was Established in Beijing. Democracy and Legal System Times, p. 12.
content_5054992.htm
31 Luo, Libin and Guo, Rui. (2018). Trade in Services in the Context of the New Era:
Trends and Strategies. Overseas Investment and Export Credit, 1, 14–18.
32 This will be discussed in more detail later in the book.
33 Jiang, Xiaojuan. (2008). China’s Thirty Years of Opening-Up: Retrospect and Prospect.
Social Sciences in China, 06, 66–85.
34 David, Throsby. (2015). Economics and Culture (1st edition), translated by Wang,
Zhibiao and Zhang, Zhengrong. China Renmin University Press, p. 122.
35 Qi, Shuyu and Lu, Xiaolu. (2018). On Relaxing Cultural Market Access. Journal of
Shandong University (Philosophy and Social Sciences Edition), 03, 1–8.
36 Elhanan, Helpman and Paul, Krugman. (1985). Market Structure and International
Trade. Cambridge, MA: MIT Press.
content_5054992.htm
2 Theoretical Studies Related to
Cultural Trade
In this chapter, we will review the theoretical advances in cultural trade. To this
end, we will first define cultural goods and services and analyze their production
and consumption characteristics, which are the basis for theoretical studies on trade
in cultural goods and services and their impact on social welfare, as well as the
premise hypothesis of several theoretical models on cultural trade. As we will see,
the salient characteristics of cultural goods and services are the economies of scale
in their production and the network externalities in their consumption. They deter-
mine a “winners-take-all” phenomenon in the cultural industry under market mech-
anisms, which is contradictory to the “difference” and “diversity” emphasized by
the word “culture”, and poses a certain threat to it. In the context of globalization,
when the above-mentioned laws are extended to the international sphere, the lib-
eralization of international trade in the field of cultural industries leads to a global
threat to diversity, which in turn has an impact on the national identity, traditional
culture and social values of some countries—especially small ones—and a series
of issues related to the supra-economic sphere, thus giving rise to great controver-
sies and being reflected in the emergence of “cultural exceptions” to international
trade rules.
2.1 Definition and Characteristics of Cultural Goods and Services
2.1.1 Definition of Cultural Goods and Services and the Object of This Study
2.1.1.1 Review on the Definition of Cultural Goods and Services

Defining cultural goods and services is not an easy task. Current definitions of
cultural industries, cultural goods and services are not uniform in countries and
international organizations around the world, which affects their industrial clas-
sifications differently and poses challenges for academic research and international
comparisons.
According to United Nations Conference on Trade and Development (UNC-
TAD), cultural goods and services have the following characteristics: firstly, their
production requires human creative input; secondly, they become carriers of sym-
bolic messages for consumers, which do not only satisfy pragmatic goals but also
DOI: 10.4324/9781003424796-2
Theoretical Studies Related to Cultural Trade 19
serve some larger communicative goals; thirdly, they contain, at least potentially,
intellectual property rights belonging to their producers. Another distinctive char-
acteristic of cultural goods and services is that they contain or generate a cultural
value beyond commercial value that cannot be measured in monetary terms, and
this becomes a distinctive characteristic that distinguishes them from other creative
goods and services.1 This definition is in line with that given by David Throsby, a
leading cultural economist from Australia. He emphasizes three key points: firstly,
cultural goods and services are centered on “creativity”. Therefore, cultural prod-
ucts and services that are closer to the original creativity, such as music, dance,
drama, literature, visual arts and handicrafts, are the most core cultural products;
secondly, cultural goods and services should be related to intellectual property
rights, which strengthens the product attributes of cultural products. Only with
intellectual property rights can market transactions be carried out. Thirdly, cultural
products should have cultural value, which means that in addition to economic
value, cultural value is also an important dimension to examine the value of cul-
tural products.
United Nations Educational, Scientific, and Cultural Organization (UNESCO)
defines a cultural product as a consumer product that transmits ideas, symbols and
lifestyles. It provides information and entertainment, which in turn creates group
identity and influences cultural behavior. Cultural goods based on the results of
individual and collective creativity are constantly reproduced and new values are
attached to them as they are industrialized and sold worldwide. Books, magazines,
multimedia products, software, audio tapes, films, videos, audiovisual programs,
handicrafts and fashion designs make up a wide variety of cultural goods.2 There-
fore, cultural industries are defined as “a series of activities that produce, reproduce,
store, and distribute cultural goods and services according to industrial standards”
and that “small-scale, fragmented production of cultural goods that does not follow
a cycle of production, distribution, and sale is not a cultural industry”.
The British government defines cultural industries as “those activities that gener-
ate potential wealth and employment from the creativity, skills and wisdom of in-
dividuals and through the exploitation and production of intellectual property”; the
Finnish Cultural Industries Council defines cultural industries on four levels to serve
the needs of different policy objectives: the first is productive activities based on
cultural values or significance; the second is artistic creation, traditional and con-
temporary artworks, art exhibitions and cultural dissemination activities; the third is
business activities related to commercial operations, the size of audiences and view-
ers and the ability to expand the dissemination of cultural and artistic works; and the
fourth is industries that refer to cultural enterprises, viewing the creation of culture
and art as businesses. Others define the cultural industry as “composed of manufac-
turers that mass produce products and services with sufficient artistic content to be
considered to be significant in terms of creativity and culture”. The key feature is the
combination of industrial mass manufacturing and creative content.3
Among the models for the definition of cultural products, there is a “concen-
tric circle model”, which holds that different items vary in terms of the ratio of
cultural content to commercial value. The higher the ratio, the more nature of
20 Theoretical Studies Related to Cultural Trade
cultural products or cultural industries they possess. Therefore, the cultural and
commodity properties of products form a continuous system rather than one or
the other. For example, David Throsby, a leading cultural economist, argues that
cultural industries are centered on “creative ideas” that are constantly combined
with other input elements to encompass an ever-expanding range of products and
thus radiate outward. Therefore, the core of the cultural industries is the creative
arts in the traditional sense, such as music, dance, theater, literature, visual arts,
crafts and newer art forms such as video arts, performing arts, computer and mul-
timedia arts, etc. When the concentric circle model is further extended, “cultural
goods” can be obtained, including book and magazine publishing industry, radio
and television industry, newspaper industry and film industry. The characteristic of
these extended industries is that they produce cultural and non-cultural goods and
services simultaneously. Finally, the boundaries of cultural industries can be fur-
ther expanded to accommodate industries that are not cultural in nature but whose
products contain some degree of cultural content, including advertising, tourism
and construction services—advertising requires creative input at some operational
levels; some segments of the tourism industry are based on culture; and the build-
ing services industry strives for design quality far beyond practical requirements.
Such a “concentric circles model” of cultural industries has “creative ideas” at its
core, and as creative ideas spread, the concentric circles expand outward to encom-
pass a wider range of production areas.4
It can be seen that the definitions of cultural goods, services and cultural indus-
tries vary, which in turn affects the scope of industry statistics in different coun-
tries, but relatively speaking, the definition proposed by David Throsby and the
“concentric circles model” industry classification formed on this basis is the one
with more consensus and is more frequently cited.
2.1.1.2 Relatively Narrow Scope of This Book’s Research

Considering the degree of commonality in economic attributes and the resulting
research difficulties, the objectives of this study and the progress of the realistic
background, the cultural products and services studied in this book are relatively
narrow compared to the above definition and the scope of the industry and refer to
cultural products with the following core characteristics: firstly, they have a clear
creative content, with “creative ideas”, which is consistent with David Throsby’s
definition; secondly, they are produced and distributed on an industrial scale, which
is consistent with UNESCO’s definition, that is, small-scale, fragmented cultural
products that do not follow a cycle of production, distribution and sales are not
cultural industries; thirdly, they embody certain intellectual property rights and
this is consistent with UNCTAD’s definition. Therefore, this study defines cultural
products as products and services that embody certain intellectual property rights
and cultural values, starting from creativity, and are produced, reproduced, stored
and distributed on an industrial scale.
Therefore, this book does not discuss products and services such as artworks,
cultural heritage and museums for the time being, neither because these products
and services are not cultural products in a broad sense, nor because they are not
important enough; in fact, artworks, cultural heritage and museums have been im-
portant elements in the field of cultural product research at home and abroad, and
it is also a difficult point to apply economics to analyze. The reason why they
are not studied in this book is because the economic properties of these types of
products are very special and need to be studied separately. Moreover, the focus of
this study is on how to make use of the opportunities of globalization to develop
foreign cultural trade efficiently, and therefore focuses on those cultural products
and services with economies of scale in production and network externalities in
consumption. The products and services of art, cultural heritage and museums are
not suitable for the analytical framework of this study because they do not possess
these characteristics. Therefore, it does not mean that they are not important, but
they are beyond the scope of this study. In addition, the author believes that in
order to realize the development potential of cultural industries and raise their sta-
tus in the national economy in the future, it is inevitable that the economy of scale
effect and production efficiency will be brought into play by increasing capital
investment and upgrading technology, which is a trendy direction; the current tech-
nological progress, especially the popular application of the Internet, is indeed ena-
bling more and more cultural products and services to have the characteristics of
economy of scale effect and network externalities. For example, the application of
the Internet and digital technology is making museums more and more diversified
in terms of dissemination channels.5 Finally, from the perspective of the industrial
development environment, the relationship between “popular cultural products”
and “niche cultural products” is not always mutually exclusive, and sometimes the
development of the former brings space for the development of the latter. In reality,
countries and regions with well-developed mass cultural industries often cultivate
demand and market space for niche art products, and the capacity of a small market
segment in a large market can even be larger than the mainstream space in a small
market. For example, as we will see in our case study of the Hong Kong film indus-
try, although the Hong Kong film industry was labeled as “commercialized” during
the glory days of the 1990s, a number of excellent art film directors have emerged
in Hong Kong. Therefore, it makes sense to choose this part of cultural products
and services, which has economies of scale and network externalities as its core
characteristics, as the object of study.
One point worth emphasizing is that the rest of this book takes film and televi-
sion industries as main cases, not because they include all cultural industries, but
because they are the most consistent with several important economic characteris-
tics and attributes highlighted in the theoretical foundation of this book, and there-
fore best reflect and support the main ideas of this study.
2.1.2 Characteristics of Cultural Goods and Services
2.1.2.1 The Contradiction Between Cultural Diversity and the Requirement of

Industrial Standardization
Although different countries, organizations or scholars have provided different def-
initions of cultural industries, they all define cultural industries as a combination
of “culture” and “industry”. There is a certain “contradiction” between “culture”

and “industry”. “Culture” inherently requires “diversity” and “difference”, while
the most important characteristics of “industry” are “standardization”, “reproduc-
ibility” and “mass production”. However, from an economic point of view, there is
a natural contradiction between the two. Given the total size of market demand, the
more “differentiated” cultural products there are, the smaller the scale of produc-
tion for each category; conversely, increasing the scale of production for individual
products decreases the number of varieties that the market can accommodate.6 It
is for this reason that the term “cultural industries” first appeared as a critic in the
early works of the Frankfurt School in the 1930s and 1940s, which denounced the
commodification of art, arguing that culture and economy were mutually exclu-
sive, driven by totally incompatible logics, and when people try to integrate the
two, cultural integrity is always destroyed.7 It can be argued that the development
of cultural industries has been accompanied by contradictions and controversies
between the two.
All other things being equal, the “difference” and “diversity” required by the
cultural nature of cultural products make them costly, which is why culture has
long been associated with the intellectual structure, ideology and behavior of the
so-called “upper class”,8 such as the aristocracy and intellectuals, and seems to be
inherently “niche”; while the industrial nature of cultural products requires their
mass production to reduce costs so that a larger group of people can have purchas-
ing power for cultural products, which is called “mass culture”.
2.1.2.2 The Phenomenon of “Winner-Takes-All”
The contradictions between the “cultural” and “industrial” aspects of the cultural
industries described above are further exacerbated by the characteristics of cultural
product production.
2.1.2.2.1 SIGNIFICANT ECONOMIES OF SCALE IN PRODUCTION
The economies of scale in the production of cultural goods are significant, giv-
ing cultural goods a strong tendency to “maximize audience size”.9 The high ratio
of fixed costs to variable costs is a prominent feature of cultural product produc-
tion, which leads to a rapid increase in profitability once the product becomes a
best seller, and once the break-even point is reached, additional unit sales can lead
to a surge in profits. In order to achieve “audience maximization”, many cultural
products use a “secondary sales” model, in which a product faces two markets: the
advertising market and the audience market, with the former being the main source
of income for the cultural product, and even making the price that the “audience”
(i.e., consumers) need to pay is very low. Withers and Alford argue that this very
low or even zero consumer price leaves audiences with no mechanism to express
their preferences.10 In the case of free-to-air television programming, for example,
it differs from traditional markets where people express their preferences through
their willingness to pay a price, but this mechanism does not exist in the free-to-air
television domain. This feature reinforces the tendency for program replication
and “lowest common denominator” programs, as advertisers sponsoring programs

are generally incentivized by audience maximization, resulting in a lack of cultural
diversity. For example, in the US television market, in order to win a larger audi-
ence of people of all cultural backgrounds, the “Least Offensive Principle” is used
by American television programmers to avoid infringing on any national or ethnic
cultural sentiment in the same program, and to seek the common cultural aspira-
tions of the people in each cultural context.11
Since the economies of scale in the production of cultural products are particu-
larly significant, the marginal cost of many cultural products is almost zero, so in
reality, there is no difference in the pricing of many cultural products, which makes
the difference of cultural products not reflected in pricing, which is an important
reason for the “winner takes all” of good cultural products.12
2.1.2.2.2 NETWORK EXTERNALITY OF DEMAND
The “network externality” characteristic of cultural product consumption13 has

been referred to as “economies of scale in consumption”14: the larger the base of
consumers using the product at the moment, the more attractive the given product
is. When people find that the product they consume is consumed by more people,
their utility from the process of consuming the cultural product increases.15 This
is because the consumption of cultural products has a certain “social networking
function”16 and because the search cost is high, and in order to reduce the search
cost, consumers’ demand for a cultural product may be extremely concentrated.17
At this point, the demand for a certain cultural product becomes a function of the
number of existing consumers of that product.
2.1.2.2.3 “WINNER-TAKES-ALL” AND THE LACK OF DIVERSITY
With the combination of economies of scale in production and network externali-

ties in consumption, the cultural industry is prone to “winner-takes-all” and thus
cultural diversity is threatened.
Rosen analyzes the reasons for the phenomenon of “winner-takes-all” with the
example of “superstars”: first is the imperfect substitutability.18 When a service is
narrowly defined (e.g., Beethoven’s concerts), its consumption is imperfectly sub-
stitutable with that of other cultural goods: i.e., consumers prefer a smaller quantity
of a high-quality service to a larger quantity of a medium-level service, e.g., good
A is twice the quality of good B, but consumers still do not believe that two units
of good B can replace one unit of good A. There is no substitute between quality
and quantity. People are more willing to pay higher prices for higher-quality prod-
ucts, which makes a small number of high-quality service providers significantly
more profitable. Thus, the income function with quality as the independent variable
is convex (convexity, implying increasing marginal returns to quality). “Several
consecutive average performances together cannot be compared to one outstanding
performance”, just as being seen ten times by an average-level doctor is not as ef-
fective as being seen once by a prestigious doctor. Secondly, some cultural products
have a “club “product nature—the unit cost decreases as the number of audience
increases. Originally, as the number of viewers increases to a certain level, there will
be crowding costs increase, so there is an optimal audience size. But the emergence
of reproducible cultural products such as CDs, television, books, videos or films has
reduced the crowding cost significantly, even to zero, which helps a particular artist
(or a small group of artists) to satisfy the entire market, resulting in a winner-takes-all
phenomenon.19 The third reason for the winner-takes-all phenomenon is suggested
by Burke in his discussion of the economics of the music industry: search costs,20
where Rosen’s model assumes that there is no cost to consumers of searching for
talented artists.21 But search costs may actually be a major cost to people when pur-
chasing the work of unfamiliar artists (e.g., buying an entire album without having
heard all of the work). Thus, consumers’ motivation to avoid search costs may lead to
an extreme concentration of consumer demand for a particular artist. Burke finds that
when an artist releases a work that increases his media exposure, his ranking in the
charts increases;22 also, with the advent of the Internet, in the United Kingdom, the
top 100 best-selling songs’ share in the annual single sales dropped from 53 percent
to 30 percent in 2004–2005 and further to 20 percent in 2008, facts the authors argue
that provide evidence for the search cost theory.
2.1.2.2.4 CONSUMPTION CAPITAL REINFORCES WINNER-TAKES-ALL
One characteristic of the demand for cultural products is that there is a “positive
addiction effect”. For example, the more good music a person has heard, the more
likely he is to have good taste in music, so the marginal utility of cultural con-
sumption increases as people’s appreciation of cultural products increases, and ap-
preciation is a function of past consumption experience.23 Thus, in the process of
consuming cultural products, a “consumption capital” is formed, and the marginal
utility of cultural consumption increases with the accumulation of consumption
capital. Becker distinguishes between two components of consumption capital:
personal capital, which is formed by an individual’s past experience of consump-
tion and related experiences24; and social capital, which is the influence of others on
an individual’s utility, i.e., the influence of peers and related individuals. The latter
can also be classified as a network externalities of consumption as described above.
Another theoretical approach is the “learning-by-consuming” theory.25 Here,
consumers are unaware of their true preferences and tastes and discover them
through repeated experiences, which are sequential and non-systematic “learning-
by-consumption” processes. However, unlike positive addiction theory, the “learning-
by-consumption” effect assumes that each experience can have both positive and
negative effects on consumers’ tastes and preferences. The expectation value of the
effect is zero.
2.1.2.2.5 THE “GATEKEEPER” ROLE OF CULTURAL PRODUCT SUPPLIERS
Caves points out that firms in the creative industries exercise selective produc-
tion and marketing (from a large or even excess supply of creative content),26 and
therefore, they have the ability to determine which cultural goods and services are
offered to consumers. The goal of maximizing profits or ensuring long-term growth

is not neutral with respect to cultural production, which affects cultural develop-
ment. Thus, if record companies believe that hip-hop or heavy metal rock will be
commercially successful, they can influence youth culture; or if publishers believe
that female readers only love romantic stories with happy endings, they will recom-
mend those stories instead of choosing to publish works of more cultural and social
importance, which can have an impact on the image of women. Culture industry
vendors, both for-profit and not-for-profit institutions, act as filters or coordinators
between artists and consumers and have the ability to influence artists’ careers and
cultural output.
2.2 A
Brief Review of the Cultural Trade Theory and Its Relevance
to China
Theoretical explanations of cultural trade are based on the characteristics of the
cultural products, with the economies of scale of production and network externali-
ties of consumption as important assumptions of the theoretical model, and study
the influence of cultural trade liberalization or trade protection on welfare growth
and distribution, considering cultural diversity as an important part of social wel-
fare. Empirical studies are more often found at the level of industry segments.
Francois and van Ypersele show that tariffs on cultural goods are welfare-
enhancing when there are significant economies of scale in product production
and strong heterogeneity in the preferences of trading countries.27 For example, if
France imposes a tariff on Hollywood films, the market share of Hollywood films
decreases, prices increase and the market shares of French and US independent
films increase in their respective countries. This could lead to an overall welfare
gain in both countries, but only if the following conditions are met: both coun-
tries value Hollywood movies similarly, but at the same time a large number of
consumers in France believe that French movies are worth a lot more than they
are worth to other French citizens, and a large number of consumers in the United
States believe that non-Hollywood movies are worth a lot more than Hollywood
movies; at this point, overall consumer surplus rises. Janeba applies Ricardian’s
standard trade model, assuming constant returns to scale,28 and adds the assump-
tion of positive network externalities in the consumer process of cultural products.
His study shows that under certain assumptions, trade has the potential to reduce
the level of welfare in a country compared to a closed economy: because trade
changes the price of network products and people can switch to imported network
products, thus worsening the consumer welfare of domestically produced cultural
products because the price and user base of domestically produced cultural prod-
ucts deteriorate. Although the “home market effect model” proposed by Helpman
and Krugman is not directly focused on cultural trade,29 it has been deeply used
to explain some phenomena in the field of cultural trade because its assumptions
are more consistent with some cultural trade situations and has become the basis
of cultural trade theory research. For example, Rauch and Trindade add network
externalities of cultural product consumption to their model30 based on Helpman
and Krugman’s home market effects model31 and combine them with economies
of scale in production. The derivation of their model showed that, in a model con-
sisting of two countries with differentiated cultural products, the cultural product
of the smaller country may disappear if the cultural discount is not too large and
the difference in market size between the two countries is large enough. Thus, the
“home market effect” is reinforced by cultural globalization. An increase in cul-
tural globalization—or a decrease in the cultural discount—reduces the number of
cultural product styles, leading to the stronger network externalities; at the same
time, the quality of future cultural products decreases, because in the model, the
quality of future cultural products depends on the current number of cultural prod-
ucts available in both countries. Bala and Van Long study how the relative scarcity
or abundance of cultural goods and the resulting price levels allow people to form
preferences between generations.32 They show that in a closed economy, prefer-
ences differ and are relatively stable between a large country and a small country
and that free trade leads to the “extinction” of preferences in the small country. The
small country would gradually lose its cultural identity, leading to the conclusion
that trade may lead to the disappearance of cultural diversity.
The conclusions of the theoretical study can be summarized as the following
points: free trade will lead to a reduction of cultural styles worldwide. Cultural
styles produced in large countries will dominate, while those produced in small
countries will diminish or even disappear completely under certain conditions. The
existence and variety of cultural styles produced in small countries will depend on
the relative economic size of large countries, cultural differences between them,
the cost of communication between them and the network externalities of product
consumption. The larger the relative economic size of the large country, the smaller
the cultural differences between the two countries, the lower the communication
costs between the two countries, and the stronger the network externalities of prod-
uct consumption, the fewer cultural products produced by small countries, and at
a certain threshold, they will disappear to zero. Of course, not all of what large
countries produce is necessarily derived from their own cultural styles, and not all
of what small countries produce is necessarily derived from the cultural styles of
small countries.
Policy implications of the theoretical discussions include the followings. First,
barriers to cultural trade are beneficial for the globally decentralized production of
cultural goods, protecting cultural goods productions in small countries, but not
always protecting the cultural styles of small countries, since producers in small
countries also produce styles in large countries to reap the network externalities of
consumption. That is, protecting production does not necessarily mean protecting
culture, and protecting culture or disseminating culture does not necessarily mean
protecting domestic production. However, the link between local production and
local culture is not entirely absent.
The above-mentioned theoretical studies on cultural trade have practical im-
plications for China’s cultural industry and trade in the following aspects: firstly,
the size of China’s cultural market is growing rapidly and its gap with that in
developed countries such as the United States is becoming smaller and smaller;
in other words, China is during a process of transition from a small country to a
large country in terms of cultural market. Secondly, China has its own cultural
tradition, which is very different from western culture, and there is a consider-
able cultural distance between them. Thirdly, cultural industries are playing an in-
creasingly important role in China’s economy. “To make cultural industry a pillar
industry” and “expansion of the international influence of Chinese culture” have
become important goals of the China’s 13th Five-Year Plan. In the above context,
how should China’s cultural industry develop in the era of globalization? How to
deal with the relationship between the development of cultural industry and the
international dissemination of Chinese culture? How to understand the relationship
between opening up and protection of cultural industries? The literature on both
theoretical and empirical studies of cultural trade sheds light on the answers to the
above questions.
Notes
1 Luo, Libin. (2013). Cultural Marketing. Beijing: Higher Education Press.
2 Li, Xiaomu and Li, Jiashan. (2007). International Cultural Trade: A Review and Analy-
sis of Concepts. International Trade, 2007(2), 41–44.
3 Towse, Ruth (ed.). (2011). A Handbook of Cultural Economics (2nd edition).
Cheltenham, and Northampton, MA: Edward Elgar.
4 David, Throsby. (2015). Economics and Culture (1st edition), translated by Wang,
Zhibiao and Zhang, Zhengrong, China Renmin University Press, p. 122.
5 Liu, Jingjing. (2016). Internet Age: Governance Reform of Public Cultural Services.
Beijing: Intellectual Property Publishing House.
6 This characteristic of cultural industries can be explained in the framework of Paul
Krugman’s new trade theory. See Thomas A. Pugel, International Trade (15th edition),
translated by Zhao, Shudong and Shen, Yanzhi. Beijing: Renmin University of China
Press, 2012.
7 UNESCO and UNDP. Creative Economy Report 2013 (Chinese Version). Translated by
Yi Na et al. Beijing: Social Sciences Academic Press, 2014.
8 Jiang, Xiaojuan. (2018). Economic Analysis of Sports Industry. Beijing: Citic Press, p. 5.
9 David, Hesmondhalgh. (2006). Cultural Industries. Translated by Liao, Peijun.
Taipe: Weber Culture International LTD. Rosen, Sherwin. (1981), The Economics of
Superstars. American Economic Review, 71: 845–858. Burke, A. E. (2011). The music
industry, in A Handbook of Cultural Economics (2nd edition). Cheltenham, and North-
ampton, MA: Edward Elgar Publishing. Burke, A. E. (2011). The music industry, in A
Handbook of Cultural Economics (2nd edition). Cheltenham, and Northampton, MA:
Edward Elgar Publishing.
10 Glenn, Withers and Katrina, Alford. (2011). Broadcasting, in Ruth, Towse (eds.) A
Handbook of Cultural Economics (2nd edition). Cheltenham & Northampton, MA:
Edward Elgar.
11 Michael, Curtin and Jane, Shattuc. (2009). The American Television Industry, BFI
Publishing.
12 Jiang, Xiaojuan. (2018). Economic Analysis of Sports Industry. Beijing: Citic Press, p. 5.
13 Gunther, G. Schulze. (2011). International Trade, in Ruth, Towse (eds.) A Handbook of
Cultural Economics (2nd edition). Cheltenham, and Northampton, MA: Edward Elgar.
14 Katz, Michael L. and Shapiro, Carl. (1986). Technology Adoption in the Presence of
Network Externalities. Journal of Political Economy, 94(4), 822–841.
15 Janeba, Eckart. (2007), International Trade and Consumption Network Externalities.
European Economic Review, 51, 781–803.
16 Zhou, Duanming. (2005). Economic Analysis Framework of Language. Journal of
Jiangsu Administrative Institute, 3, 31–35.
17 Burke, A. E. (2011). The music industry, in A Handbook of Cultural Economics (2nd

edition). Cheltenham, and Northampton, MA: Edward Elgar Publishing.
18 Rosen, S. (1981). The Economics of Superstars. The American Economic Review, 71(5),
845–858.
19 Gunther, G. Schulze. (2011). International Trade, in Ruth, Towse (eds.) A Handbook of
Cultural Economics (2nd edition). Cheltenham, and Northampton, MA: Edward Elgar.
21 Rosen, Sherwin. (1981). The Economics of Superstars. American Economic Review, 71,
845–858.
23 Stigler, George and Gary, Becker. (1977). De Gustibus Non EstDisputandum. American
Economic Review, 67, 76–90.
24 Becker G. S. (1996), Accounting for Tastes[M]. Princeton, NJ: Harvard University
Press, p. 4.
25 Lévy-Garboua, L. and Montmarquette, C. (1996). A Microeconometric Study of
Theatre Demand. Journal of Cultural Economics, 20(1), 25–50.
26 Caves, R. E. (2000). The Creative Industries. Cambridge, MA: Harvard University
Press.
27 Francois, Patrik and Tanguy, van Ypersele. (2002). On the Protection of Cultural Goods.
Journal of International Economics, 56(2), 359–369.
28 Janeba, Eckart. (2007). International Trade and Consumption Network Externalities.
European Economic Review, 51, 781–803.
29 [Israel] Erhnam, Helpmann [US] Paul, Krugman. (2014) translated by Yin, Xiangshuo
and Yin, Xiangkang, Market Structure and Foreign Trade One by One Incremental
Payoffs, Imperfect Competition and International Economy(1st edition), Gezhi Press –
Shanghai Sanlian Press – Shanghai People’s Publishing House.
30 Rauch, James E. and Vitor, Trindade. (2009). Neckties in the Tropics: A Model of Inter-
national Trade and Cultural Diversity. Canadian Journal of Economics, 42(3), 809–843.
31 Helpman, E. and Krugman, P. (1985). Market Structure and Foreign Trade: Increas-
ing Returns, Imperfect Competition, and the International Economy. Cambridge: MIT
Press.
32 Bala, V. and Long, N. V. (2005). International Trade and Cultural Diversity with Prefer-
ence Selection. European Journal of Political Economy, 21(1), 143–162.
Another random document with
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TEST ON SHEEP PAUNCHES AND PLUCKS TO TANK.
(Trimmings from sheep house.)
Green weight to tank 1,150 lbs.
Yield No. 1 tallow 105 lbs. 9.13%
Yield pressed tankage 89 lbs. 7.73%
Yield dry tankage 45 lbs. 3.86%
TEST ON SHEEP (OFFAL).
Green weight to tanks 28,680 lbs.

Yield tallow No. 1 4,538 lbs. 2.28 lbs. per head
Yield tallow No. 2 730 lbs. .37 lbs. per head
Yield tankage 2,893 lbs. 1.46 lbs. per head
TEST ON NECK TRIMMINGS FROM KILLING FLOOR.

Green weight to tanks 880 lbs.
TEST ON SHEEP FEET TO TANK.

Green weight to tank 1,170 lbs.
Operating Odorless.—The question is frequently asked if rendering

departments can be operated odorless. They can be operated so as not to
become a nuisance. To do this requires:
(1) Ample tanks with no neglect about promptly rendering all products
and reducing them to lard, tallow or dry fertilizer.
(2) Collecting and evaporating all tank waters.
(3) Drying of tankage done under vacuum or otherwise controlling
odors.
(4) Catch basins under cover, skimmed frequently and contents cooked
promptly.
(5) The rendering department kept tightly closed and department
operated with forced draft, all discharged air passed through large water-
wash, and the introduction into the air of gas boiled from tar oil.
(6) All tank exhaust and vapors connected to a piping system, the steam
condensed by water spray, and the vapor collected and passed under
furnaces of boilers.
(7) Keep everything hot, allow nothing to lay around and sour.
Catch Basin.—Every packing house needs an adequate catch basin
system. Local basins established in departments near to points where
products are handled, serve to collect many fats and oils that, by clean
handling, are edible products, and can be used as such.
Where melted fats are produced cold water sprays should be introduced
to coagulate the oils. Wiers for over and under-flow should be put in to
retard flow and submerge particles so they may harden and float. A large
general basin should be introduced so that all outflowing sewers can be
passed to them, to the end that all water flows slowly through the basin to
catch any and all particles of floating fats or meats.
The basins should be placed under the care and jurisdiction of one
person, who should see that they are kept clean and frequently skimmed.
It is to good purpose to place them under roof so they will have attention
at all times.
CHAPTER XV.
TANK WATER.
Soil Fertility — Animal Feeding — Tank Water — Separation of Solids —
Collecting Grease — Testing Tank Water — Evaporating Tank Water —
Description of Apparatus — Cleaning Evaporators — Table of Boiling
Points — Testing Stick — Copperas in Water to Evaporate — Solids in
Water — Drying Stick — Value of Tankage — Quantity of Tank Water —
Cost of Evaporating.
Soil Fertility.—The constant drain on the soil by raising of grain;

feeding animals and sending them away for slaughter, and the non-
return of the nitrogen element has made great inroads on the
productivity of soil. Through volume after volume and in every
manner possible, economic writers are impressing this upon the
agricultural interests and advocating the making up of such deficit by
rotating crops, turning under legume and plants that might extract
nitrogen from the air by the processes of nature which daily are
becoming more familiar to every one. Value and demand for the
nitrogenous elements for this purpose has caused the packer to
exercise all possible care to produce and conserve for sale any and
all nitrogenous products.
Animal Feeding.—Experiment has also shown that nitrogenous
products have a very high value as a nutritive food for growing and
fattening animals, so much so in fact, that in many agricultural
districts the entire output of tankage from local packing houses is
now sold in the immediate neighborhood for stock foods. Under
various names evaporated tank water is an ingredient of these.
Tank Water.—Invisible but in considerable quantity, nitrogenous
solids were formerly lost in the various waters from cooking, but they
are now collected and reduced to a semi-solid, or solid form. These
are classified under the one broad name of tank water, but they
include almost any water in which animal matter is cooked unless
the water be of such character that it can be used for edible
purposes. The chief sources of supply are rendering tank water,
blood water, bone house cooking water, ham and tripe boiling water,
etc. It is estimated that any water showing density of ¹⁄₂° Beaume
scale is worthy of concentration.
Keeping Water Concentrated.—Evidently the more dilute the
water, the more water it is necessary to evaporate, and hence more
costly to concentrate. In raising the tanks so as to flow the oil from
the tank cocks, it is necessary at times to admit fresh water. To avoid
this the water from one tank is usually transferred to another of the
same character by use of a pump.
Collection of Waters.—After the tankage has been dumped into
the skimming box and all grease skimmed off, the tank water should
be drawn into a separate vat. The “press water,” which is the water
from the pressing of the tankage, should also be collected. The floor
drainage except from the tank filling floor, and practically all water
produced in the tank house, should be collected; in fact, some
operators go to the extreme of not connecting the tank house sewer
system to the city sewer so as to intentionally preclude the wasting
of water.
Preparation of Solids.—The tank water is collected in large vats
for processing. The solids or sludge is undesirable to handle,
consequently in draining the tank water from the surface vats into the
storage, it is necessary to have the holes of the screens in the
surface vats reduced to about one-quarter of an inch in size in order
that all of the solids will be retained in the surface vats and not be
permitted to go into the tank water catch basins.
The tank water storage vats should be equal to a day’s capacity
and should be filled in rotation in order that agitation will be going on
only in the vat being filled or the vat being emptied, and that the
water in the balance of the storage vats will be permitted to be held
under a settling process in the meantime, which is as follows: Heat
the water to a temperature of 180° to 185° F., and then allow it to
drop down to 170° F., carrying it at this temperature from eight to
twenty-four hours, according to the length of time it is possible to
carry the water for settling purposes, up to 36 hours is an advantage.
Collecting Grease.—In the surface boxes spoken of in preceding
chapter, it is very essential to agitate the tankage in the surface vats
and keep it under steam long enough for some of the grease to rise
to the top of the surface boxes and be skimmed off before the tank
water is run into the storage vats. Skim the grease very carefully
from the top of the water in any vat that is to be used for evaporation;
then pump the water to the evaporator supply tank. After the water is
pumped out of the basin, it will be necessary to remove the bottom of
settlings each time after the tank is emptied.
Settlings in Bottom of Vat.—Pump the bottoms from the holding
tanks into a surface box from which these settings are passed on to
the press cheeses with pressed tankage, so that the fibrous material
will collect the sludge. It is absolutely necessary that these settlings
be taken out of the storage vats each time the vats are emptied in
order to keep them sweet and to prevent the tank water from souring
as it certainly will, unless cleaned at least twice a week. It is much
better to clean them every time.
Testing Tank Water.—Tank water is tested with a standard
hydrometer for liquids heavier than water, and as stated previously,
any water indicating ¹⁄₂° on the Beaume scale, is collected.
A sample of the tank water is cooled to 150° F. Drop a hydrometer
into the water and take reading at a point on a level with the water; a
hydrometer reading from 1 to 20, is used for this purpose. If
hydrometer reads 2.00, the amount of the solids in the water is
estimated at 3.83 per cent as shown on the table for figuring tank
water. If the hydrometer should read 2.50, the estimated solids is
one-half of the difference between solids shown on table at 2°
Beaume and 3° Beaume added to solids at 2° Beaume which is 4.80
per cent.
Evaporating Tank Water.—The evaporating of tank water, it is
proposed to do in the most economical manner possible, and
advantage is taken of the fact that as the pressure is lowered the
boiling point is reduced. For example, water at atmospheric pressure
and sea level boils at 212° F., and water under a twenty-eight inch
vacuum boils at 100° F. Advantage is taken of these physical facts in
the evaporating of tank water.
There are a number of types of evaporators using the same
principle, although we show one only, that which is most extensively
used, the well-known Swenson machine. This apparatus consists of
one, two or three cells, dependent upon the economy it is wanted to
attain.
FIG. 73.—SWENSON EVAPORATOR.
Descriptive of the Apparatus.—The cells are numbered 1, 2 and

3, beginning at the left. The rectangular box at the bottom of each
cell consists of a cast iron false head or chamber at either end, in
which copper flues are expanded. Steam is introduced into the
chamber of No. 1, and the tubes surrounded with tank water. The
steam in the coils causes the water to boil and the steam boiled off is
passed to the steam chamber of the second cell. The tank water in
cell No. 1 by this boiling is condensed and is passed to cell No. 2,
where a further boiling takes place, and the concentrated liquid is
passed to cell No. 3 for its last boiling.
The auxiliary pumps shown are for transfer purposes from cell to
cell, and for pumping the condensate from the steam chambers.
Vacuum.—The large pump at the right hand is the vacuum pump.
The vapor withdrawn from cell No. 3 by the withdrawal action of the
pump is condensed by the introduction of cold water in the conical
enlargement shown. This condensation produces a partial vacuum,
the customary gauge measurement showing 23 to 27 inches,
dependent upon the quantity and temperature of the water. This
vacuum continues in a lesser degree to the second cell, thence to
the first and where the vacuum usually maintained is six inches. By
reference to the table of boiling points the comparative temperature
in each cell is ascertainable.
Cleaning the Evaporators.—Evaporators to be effective must be
clean, on the same principle as cleaning boilers produce best
results. At regular intervals, say, fortnightly, they should be boiled out
with a solution of 75 lbs. caustic soda in 1500 gallons of water. This
will clean the flues and maintain the machine output.
TABLE OF BOILING POINTS.

29 inch vacuum 79.07° Fahr.
28 inch vacuum 101.15 Fahr.
1 inch vacuum 212 Fahr.
Storing Stick.—The residue from the evaporators or the “Stick” as

it is now called, should be pumped into a receptacle fitted with
closed steam coils. The tank water vats are similarly fitted.
Testing Stick.—Stick is tested the same as tank water, excepting
a hydrometer graduated from 20° to 40° is used. It is usual to
evaporate to a density of 29° Beaume, which is 64.61 per cent dry
solid. To calculate the quantity of concentrated or dry stick containing
4 per cent moisture produced from 29° Beaume stick, multiply the
number of gallons of stick by 10.27 lbs. to get weight of 29° Beaume
stick; then take 64.61 per cent of this weight, which is weight of dry
solids, then add 4 per cent moisture to this amount by dividing the
weight of dry solids by .96; the result is weight of concentrated
tankage containing 4 per cent moisture.
Copperas.—This is usually “sulphate of iron” of commerce,
although some institutions make their supply thus: Using a lead-lined
vat holding about 200 gallons; into this put about 160 gallons of 60-
degree sulphuric acid, adding water enough to make the solution
about 12° Beaume. Into this solution place scrap iron of any
description and allow it to stand until the solution will dissolve no
more iron. Pump the solution into a shallow lead-lined vat with lead
coils, and evaporate to about 40° degrees Beaume. It is next drawn
off into barrels of fifty gallons each and to each barrel add forty
pounds of black oxide of manganese and thoroughly mix.
Copperas in Water to Evaporate.—An early practice and one
which had the merit of fixing free ammonia before it passes off in a
gaseous form was the introduction of copperas in tank water, while
settling, and before evaporation. The vats of tank water are tested
with a Beaume hydrometer and for every 2,000 gallons of tank water
at indicated degree, Beaume, ordinary commercial copperas should
be added as follows:
Water testing 5° Baume 166 lbs. dry copperas

Water testing 4¹⁄₂° Baume 150 lbs. dry copperas
Water testing 3¹⁄₂° Baume 117 lbs. dry copperas
These varying amounts of copperas are put into a barrel of hot

water and thoroughly stirred until dissolved. The solution is then
poured into a vat of tank water, the mass allowed to stand six or
eight hours, and then skimmed off before being pumped to the
evaporating machine.
Solids in Water.—The percentage of solids and liquids, as well as
the respective weights in tank water at different degrees Beaume,
are shown in the following table:
TABLE FOR TANK WATER.
Weight
Per Per of Weight
Degrees cent cent cubic of
Baume solids water foot gallon
1 1.90 98.10 62.14 8.30
2 3.83 96.17 62.46 8.34
3 5.77 94.23 62.79 8.39
4 7.77 92.23 63.11 8.43
5 9.85 90.15 63.43 8.47
6 11.93 88.07 63.91 8.54
7 14.04 85.96 64.41 8.60
8 16.19 83.81 64.89 8.67
9 18.38 81.62 65.38 8.73
10 20.60 79.40 65.81 8.80
11 22.71 77.29 66.39 8.87
12 24.84 75.16 66.92 8.94
13 26.97 73.03 67.44 9.01
14 29.11 70.89 67.97 9.08
15 31.27 68.73 68.49 9.15
16 33.55 66.45 69.05 9.23
17 35.88 64.12 69.61 9.30
18 38.22 61.78 70.17 9.37
19 40.59 59.41 70.72 9.45
20 42.98 57.02 71.28 9.52
21 45.11 54.89 71.89 9.60
22 47.24 52.76 72.79 9.68
23 49.37 50.63 73.09 9.77
24 51.50 48.50 73.70 9.85
25 53.63 46.37 74.30 9.93
26 56.31 43.69 74.95 10.01
27 59.04 40.96 75.60 10.10
28 61.80 38.20 76.25 10.19
29 64.61 35.39 76.90 10.27
30 67.54 32.46 77.55 10.36
31 70.34 29.66 78.35 10.46
32 73.27 26.73 78.94 10.55
33 76.24 23.76 79.64 10.64
34 79.25 20.75 80.33 10.73
35 83.21 17.79 81.00 10.83
Drying 29° Beaume Stick.—This is done in two ways, by the use

of drying rolls and by mixing with drying tankage in a rotary dryer.
When drying stick over the rolls, evaporate it in the evaporators to
26° Beaume and mix with this 26° Beaume stick, about 17 per cent
of copperas before putting the mixture over the rolls. This has a
tendency to prevent the concentrated tankage from absorbing
moisture when in storage. Many operators dry stick without the use
of copperas, but the copperas prevents in a measure the stick
absorbing moisture from the air.
Stick Rolls.—Fig. 74 shows a standard twin stick roll. This
equipment is made of two cast iron rolls built when new to sustain 50
lbs. pressure. The stick is deposited in a pan beneath and the
revolving roll collects a film of substance which is dried as the roll
revolves and is sliced from the surface of the roll by a close fitting
scraper, being removed in a powdered form.
FIG. 74.—STANDARD TWIN STICK ROLL.
Drying with Tankage.—The practice now generally adopted is the

mixing of the stick with tankage and drying in the standard fertilizer
dryer, using a fifteen foot dryer with stationary shell and revolving
shaft, with arms cylindrical type, usually known as the “Smith” dryer.
The usual charge is 4,000 lbs. pressed tankage and 1,200 lbs. stick,
agitating while the stick is being admitted so as to assist in equal
mixing. The stick should be at a temperature of 190° F., or near
thereto when used. The heated substance seems to produce less
tailings, or small balls requiring milling.
Value of Tankage.—To appreciate the value of the substances to
be collected in this manner, we refer to copy of test, made by an
expert, on a plant handling about 5,000 cattle and 5,000 hogs per
week, as follows:
ESTIMATE OF THE PRODUCTION AND VALUE OF TANKAGE MADE BY

EVAPORATING TANK WATER.
TEST FOR AMOUNT OF WATER DRAINED OFF VATS BEFORE PULLING
TANKAGE.
Av.
Tank Product Gallons gallons
No. 1 Prime tallow (cutting room bones, etc.) 1,445
No. 1 Prime tallow (cutting room bones, etc.) 1,734 1,589
No. 2 Prime tallow (bed fat, etc.) 1,645

No. 3 Prime tallow (bed fat, etc.) 1,827 1,566
No. 4 No. 2 tallow (catch basin stuff) 668

No. 6 Pluck tank 905
No. 10 Pluck tank 847 735
No. 11 Prime steam lard 1,382

No. 11 Prime steam lard 1,248 1,315
TOTAL NUMBER OF TIMES TANKS FILLED AND COOKED.

No.
Product. Tanks
Prime tallow with cutting room bones 6
Prime tallow with bed fat, etc. 10
No. 2 tallow 6
Pluck tanks 13
Prime steam lard 6
Total 41
BASIS FOR ESTIMATE OF PRODUCTION.

Average Total Solids Total Units
No. of contents contents per gal. solids Per cent of
Tanks gals. gals. lbs. lbs. Ammonia Ammonia
6 1,589 9,534 0.88 8,390 16.76 1,406
10 1,566 15,660 1.03 16,130 16.89 2,724
6 668 4,008 .399 1,599 14.59 233
13 735 9,555 .763 7,290 16.85 1,228
6 1,315 7,890 .0481 380 16.00 61
... 46,647 ... 33,789 16.73 5,652
Total units of ammonia per tank, 5,652. Average units of
ammonia per tank, 16.73. 8 per cent of moisture, dry
basis.
This production at $1.66 per unit would be worth $27.77 per ton, or
the yearly production would bring $24,396.32.
Figuring the production of tankage to be 66,000 pounds per week
and that with this could be mixed through the dryer 600 pounds or
107.3 gallons of stick, 25° Beaume with each ton of dry tankage—
then 33 × 600 pounds, or 19,800 pounds, would be the limit of
production from the tank water.
The regular tankage runs on an average of 10 per cent ammonia
and 16.4 bone phosphate, and as shown above the production from
the tank water with 8 per cent moisture would run 16.73 per cent
ammonia. The product would therefore consist of the following:
Weight Per cent Units Per cent Units

Materials pounds Ammonia Ammonia Phosphate Phosphate
Regular tankage 66,000 10.00 6,600 16.4 10,824
Evaporated tank water 19,800 16.73 3,312 ... ...
Total production 85,800 ... 9,912 ... 10,824
Analysis, ammonia 11.55%, bone phosphate 12.62%
Value per ton $19.93, or for the yearly production, $44,459.84.
Should there be added worthless material sufficient to reduce the

percentage of ammonia to 10, the following formula would apply:
Weight Per cent Units Per cent Units

Materials pounds Ammonia Ammonia Phosphate Phosphate
Regular tankage 66,000 10.00 6,600 16.4 10,824
Evaporated tank water 19,800 16.73 3,312 ... ...
Worthless material 13,320 ... ... ... ...
Total production 99,120 ... 9,912 ... 10,824
Analysis, ammonia 10%; bone phosphate 10.92%.
Value per ton $17.25¹⁄₂, or for yearly production $44,468.32
RECAPITULATION.
Value of total production for one year $44,468.32
Value of tankage for one year $30,030.00
6 per cent interest on $10,000 investment 600.00
15 per cent depreciation on $10,000 investment 1,500.00
Additional labor, five men, “full time” 2,340.00 34,470.00
Net profit on investment $ 9,998.32
Quantity of Tank Water Produced.—This is variable, depending

upon closeness of saving and density; also quantity of solid
substance measured, and other items, but generally speaking from
cattle slaughtered—ten gallons per head, and from pigs two and
one-half gallons per head are collected.
Expense of Evaporating Stick.—The following test shows the
cost of producing stick through evaporators. The cost at the present
time would be 100% higher owing to coal costs:
COST OF EVAPORATING TANK WATER.

Duration of Test 9 hours 8¹⁄₂ hours
Average Steam Pressure—1st effect 5.1 lbs. 5.1 lbs.
Average Vacuum—1st effect 11.4 lbs. 11.9 lbs.
Average Vacuum—2nd effect 19.0 lbs. 18.6 lbs.
Average Vacuum—3rd effect 27.7 lbs. 27.4 lbs.
Density of Tank Water at 150° 3¹⁄₂ ° B. 2¹⁄₂ ° B.
Average Temperature of Tank Water 203 ° 199 °
Gallons Tank Water Fed 11,476 9,625
Gallons Tank Water Fed Per Hour 1,275 1,132
Gallons Tank Water Fed Per Hour 1,338 1,220
Gallons Stick Produced 1,092.75 907
Density Stick at 150° 30 ° B. 28¹⁄₂ ° B.
Pounds Stick Produced (10.205 lbs. and 10.08
lbs. per gal.) 11,151 9,142
Pounds Water Evaporated 83,066 69,748
Pounds Steam Used—1st effect 17,712 18,509
Pounds Steam Used—Pumps 11,210 10,972
Pounds Steam Used—Total 28,922 29,481
Pounds Steam Used per 100 lbs. Stick—1st
effect 159 202
Pounds Steam Used per 100 lbs. Stick—Pumps 100 120
Pounds Steam Used per 100 lbs. Stick—Total 259 322
Cost Steam Used per 100 lbs. Stick—1st effect
at $.132 per 1,000 lbs. $.021 $.027
Cost Steam Used per 100 lbs. Stick—Pumps .013 .016
Cost Steam Used per 100 lbs. Stick—Total .034 .043
Pounds Steam Used per 100 lbs. Stick—Water
evaporated—1st effect 21.3 26.6
Pounds Steam Used per 100 lbs. Stick—Pumps 13.5 42.3
Pounds Steam Used per 100 lbs. Stick—Total 34.8 42.3
Cost Steam Used per 100 lbs. Stick, Water
evaporated—1st effect .0028 .0035
evaporated—Pumps .0018 .0021
evaporated—Total .0046 .0056
NOTE: The equivalent gallons concentrated from 10% to 70% solids are
calculated from a table and not from analysis of the tank water and stick;
therefore, are only approximately correct.
The steam cost at $0.132 per 1,000 pounds is far below present average
conditions.
Quantity Stick Produced.—The quantity of stick it is possible to

produce is indicated in the following table:
ANNUAL PRODUCTION TANK WATER AND STICK.
Basis for Approxi-
Approxi- mate
Killing mation Head
Cattle 208,304 1 to 1 208,304
Calves 36,474 7¹⁄₂ to 1 4,863
Sheep 416,325 7¹⁄₂ to 1 55,510
Packer Hogs 496,219 2¹⁄₂ to 1 231,569
Shipper Hogs 45,094 5 to 1 9,019
Total approximate killing 509,265
Gallons tank water saved 4,912,484
Gallons tank water per approximate head 9.64
Pounds of Stick made 2,766,648
Pounds of Stick made per approximate head 5.43
The relative quantity of Stick to dried fertilizer produced is about

40%, but the stick is more valuable due to its higher ammonia
content and the mixture of the stick with the standard fertilizer
increases the value per ton of the fertilizer.
CHAPTER XVI.
FERTILIZER.
Fertilizer — Blood — Receiving Tank — Cooking — Pressing — Purity —
Storing — Quick Handling — Tankage — Quotations and Value —
Grease — Influence of Stick — Digester Tankage — Slime — Dryers —
Drying — Expense for Drying — Commercial Fertilizer — State
Regulations — Mixing Materials — Conversion Factors.
Fertilizer.—In this department we discuss the manipulation of the

products after leaving the tanking process in the case of tankage,
and of blood, beginning with its release from the animal.
Blood.—The sources of the collection of blood are from animals
slaughtered, viz: cattle, sheep, calves and pigs. In nearly every
instance this is collected at a given point near the sticking rails and
transferred to the fertilizer department for processing.
It is rather difficult to pump blood, although it can be readily done
with a ball valve pump, or a centrifugal pump. The latter is
satisfactory if foreign substances can be kept out, and if the reservoir
can be situated high enough so that the blood can gravitate to the
suction of the pump. Mechanical agitation is a benefit in the
receivers. A very satisfactory way to handle blood is by means of a
blow tank. This is a tight, heavily constructed cylinder with an
admittance valve on the inlet pipe, and a closing valve on the
discharge pipe; the latter preferably a quick opening valve. A means
for admitting air or steam to the blood is arranged. To operate, the
valve on the inlet line as well as the outlet valve is closed, and air or
steam pressure is built up as required for the lift. The outlet valve is
then quickly opened when the contents of the tank is virtually “shot”
to the receiving tanks.
Receiving Tank.
—This is preferably a closed type of tank with an air vent to allow
displacement of air when blowing blood. It is preferably situated
above the cook tank with an admittance valve between them so that
blood can be lowered to the cooking tank at will.
Cooking.—Blood should be “baked,” not boiled. By this is meant,
the steam should be admitted slowly and the heat dispersed through
the mass rather than boiled violently, by admitting high pressure
steam. The blood, by this method, seems to coagulate in larger
grains, and, in pressing, a larger proportion is retained in the cloths,
while the serum or white water draining away is of a lighter color,
with the net result that the yield of blood is better.
Pressing.—The pressing is performed in the same manner as
described for tankage, except that the material is handled dry. The
waters from cooking, as well as from pressing, are saved for
evaporation as tank water. Blood when pressed properly is “caked.”
It should be broken up before being passed to the dryers.
Purity.—Means should be provided and arrangements made to
keep all raw or fluid blood free from water and manure. Frequently
cattle that are hay or grass fed, have a draining from the stomach via
the mouth when hung, and comparatively large quantities of
undigested food are spilled. This should be collected before the
animal is stuck and prevented from mixing with the blood.
Storing.—After drying, blood should be cooled and stored in piles
on the floor in dry rooms to be put in bags at the time of shipment. It
is usually unnecessary to grind or screen it. It should be dried to 8%
moisture.
Quick Handling.—Blood is so highly susceptible to decay that it
should be handled quickly and with as little contact with air as
possible.
Tankage.—This name embodies the dried material from the
residue in the tanks after cooking in digesters, and pressing. It is
classified into several grades. Digester tankage, is usually sold for
stock foods. No. 1 tankage of commerce, has a high nitrogen content
and low percentage of bone, it is usually produced from beef tanks;
No. 2 tankage is low in nitrogen or ammonia, as it is known to the
lay-mind, and high in bone. The usual comparative analysis is:
Blood No. 1 No. 2
Bone Phosphate ... 10% 28%
Ammonia 16-17% 10-12% 6-8%
Quotations and Values.—Tankage and blood is usually sold on

its value per unit of ammonia. That is to say, if blood be quoted at
$3.00 per unit of ammonia and analyzes sixteen per cent, it sells for
$48.00 per ton. Tankage may contain eleven per cent ammonia and
twelve per cent bone phosphate, quoted at $2.75 per unit, and 10c
per unit respectively, which would make the relative market $31.45
per ton.
By reference to market quotations it will be noted usually that the
lower the ammonia content, the lower the price per unit of ammonia,
consequently it behooves the maker to produce all the No. 1 tankage
possible, and this is accomplished by cooking bone as raw bone and
separately—in preference to tanking it.
Grease.—Grease in fertilizers or dried tankage is a positive
detriment. It is useless and valueless, consequently the point to be
striven for is to lower the percentage of grease to the minimum. The
best methods known are described under tanking. Some packers
doing business on a large scale have “degreasing” plants where the
grease is extracted by naphtha process, but, this is a highly
specialized department and not desirable in a small plant. By careful
attention the grease can be lowered to eight per cent on dry basis
analysis.
Influence of Stick.—The use of stick in tankage drying adds
greatly to the average ammonia content. Dried stick separately
analyzed yields 15¹⁄₂ per cent ammonia, greatly increasing the value
of the product in which it is used.
Digester Tankage.—This is a general name for the product sold
to pig feeders for providing a nitrogenous element in their feeding.
State Agricultural Departments and packers have been conducting
campaigns for years introducing this as a feed. It is usually a No. 1
tankage made from freshly killed material and promptly dried. It is
supposed to contain a stated protein content, which is really a
multiple or unit based upon its nitrogen content, 5.137 being the
factor. Stick is used in the digester tankage and with benefit provided
it is kept sweet.
In hog producing localities practically the entire output of tankage
can be disposed of to the farmer for stock food purposes.
Slime.—The slime scraped from intestines in the casing
department has a high ammonia value and should be collected and
cooked in a manner similar to the method used in cooking blood.
Drying.—This operation consists of extracting the moisture from
the tankage by means of air which is used as a vehicle to carry away
the moisture. Various devices are employed for performing this
function, such as barometric condensers, siphon tees, pipe
condensers, and fan with air wash tower. There is some objection to
all of these types, and each operator usually has some home-made
device based upon experience. The fan is the more logical; it
sweeps a large volume of air through the dryer by withdrawing it and
passing it to the wash tower. The air carries away the moisture. To
dry cheaply have a positive circulation of air through the dryer by
keeping the inlet open, the fan attached to the air outlet connection.
Single or multiple of dryers can be arranged on one fan.
Dryers.—The principal apparatus in the fertilizer department is the
dryer. Of these there are several types.
Direct Fire Dryers.—In direct fire dryers, the tankage and flame
produced by the use of oil, coke or coal, are introduced and passed
through a cylindrical rotating machine similar to a cement dryer. The
dried tankage is discharged at the opposite end from the feed, and
the gases and moisture pass through a water spray and chimney to
the air. It is practically impossible to operate a dryer of this type
without producing an offensive odor in the surrounding territory and
they are also considered hazardous from a fire standpoint.
Smith Type.—This type of dryer is shown in the illustration (Fig.
75) and is of the steam jacketed type. The barrel is stationary with a
revolving shaft and extended arms carrying the tankage upward
which falls back through the air.
Ord Type.—This dryer is also illustrated, Fig. 76, and is of the
same type, except that the shaft is placed vertical and the revolving

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China's Cultural Trade Strategy 1st

Edition Libin Luo

Traditional Ethics and Contemporary Society of China

The Unceasing Storm Memories of the Chinese Cultural

China s Miracle in Foreign Trade 1st Edition Miaojie Yu

China and ASEAN Pivoting Trade and Shock Transmission

Borderland Infrastructures Trade Development And

Free Trade and the US China Trade War A Network

The Foreign Trade of China Policy Law and Practice Gene

Environmental Strategy and Planning in China 1st

Luo Libin (Ph.D. of Economics) is Professor of Economics at Beijing Interna-

ISBN: 978-1-032-54425-0 (hbk)

List of Figures vii

1 An Introduction: Why Do I Write This Book? 1

2 Theoretical Studies Related to Cultural Trade 18

3 Opening Up of Film Market and the Development of Film

4 Imports of Cultural Products and Chinese Culture Going

5 Rise of China’s Economy and International Influence of

6 International Trade in TV Formats, Home Market Effects

8 A Forecast on Film Box Office in China’s Mainland—on

9 Opportunities, Challenges and Strategies for the

1.1 National income per capita in 1965 and 2016 6

3.1  umber, Box Office and Proportion of Box Office of Imported

6.8  hinese variety shows that achieved excellent ratings on

First and foremost, I would like to express my gratitude to my doctoral supervisor

1.1 Background and Significance of This Book

1.1.1 International Background: Globalization Deepens to the Field of

of TV programs, there is also a phenomenon that a large number of American TV

1.1.2 Backgrounds Related to China

1.1.2.1 Chinese Cultural Industry Is Faced with a Time of Opportunity

fundamentally changed some basic characteristics of TV and movie media in time

1.1.2.2 China’s Unique National Conditions Under the Background of

Under the background of globalization, China has unique advantages in enhanc-

Figure 1.1 National income per capita in 1965 and 2016.

1.1.3 Theoretical Background

1.1.3.1 Particularity of Cultural Industry Brings a New Point for the Study of

to the improvement of the quality and welfare of cultural products worldwide,

1.1.3.2 Case Studies on China Is of Great Significance

management pattern and endanger cultural security.35 Therefore, studying the

1.2 Structure of the Book

2.1 Definition and Characteristics of Cultural Goods and Services

2.1.1.1 Review on the Definition of Cultural Goods and Services

2.1.1.2 Relatively Narrow Scope of This Book’s Research

2.1.2 Characteristics of Cultural Goods and Services

2.1.2.1 The Contradiction Between Cultural Diversity and the Requirement of

of “culture” and “industry”. There is a certain “contradiction” between “culture”

2.1.2.2 The Phenomenon of “Winner-Takes-All”

2.1.2.2.1 SIGNIFICANT ECONOMIES OF SCALE IN PRODUCTION

and “lowest common denominator” programs, as advertisers sponsoring programs

2.1.2.2.2 NETWORK EXTERNALITY OF DEMAND

The “network externality” characteristic of cultural product consumption13 has

2.1.2.2.3 “WINNER-TAKES-ALL” AND THE LACK OF DIVERSITY

With the combination of economies of scale in production and network externali-

2.1.2.2.4 CONSUMPTION CAPITAL REINFORCES WINNER-TAKES-ALL

2.1.2.2.5 THE “GATEKEEPER” ROLE OF CULTURAL PRODUCT SUPPLIERS

offered to consumers. The goal of maximizing profits or ensuring long-term growth

17 Burke, A. E. (2011). The music industry, in A Handbook of Cultural Economics (2nd

TEST ON SHEEP (OFFAL).

Green weight to tanks 28,680 lbs.

TEST ON NECK TRIMMINGS FROM KILLING FLOOR.

TEST ON SHEEP FEET TO TANK.

Operating Odorless.—The question is frequently asked if rendering

Soil Fertility.—The constant drain on the soil by raising of grain;

List of Figures vii

1 An Introduction: Why Do I Write This Book? 1

2 Theoretical Studies Related to Cultural Trade 18

1.1 National income per capita in 1965 and 2016 6

3.1 umber, Box Office and Proportion of Box Office of Imported

6.8 hinese variety shows that achieved excellent ratings on

1.1.1 International Background: Globalization Deepens to the Field of

1.1.2.2 China’s Unique National Conditions Under the Background of

1.1.3.1 Particularity of Cultural Industry Brings a New Point for the Study of