China’s film companies flee Xinjiang tax haven in wake of Fan Bingbing evasion scandal

A tightening of rules in the once tax-free city of Khorgos and Beijing’s crackdown on the entertainment industry has seen production houses running for the hills.

More than 100 Chinese television and film production companies have applied to relocate away from a remote city in Xinjiang amid a wide-ranging investigation into tax evasion in the entertainment industry and suggestions they were no longer free to shoot in the troubled region.

The exodus from Khorgos, close to China’s border with Kazakhstan, started in June and coincided with the start of an inquiry into Fan Bingbing, the nation’s highest-paid actress. Fan, whose own production company was registered in the city, was detained and later ordered to pay nearly 884 million yuan (US$127.9 million) in fines and unpaid taxes.

The exodus from Khorgos coincided with the start of a tax evasion investigation into Fan Bingbing, China’s highest-paid actress.

The exodus from Khorgos coincided with the start of a tax evasion investigation into Fan Bingbing, China’s highest-paid actress.

A woman who works for a small Chinese film production company, who asked not to be named, said the Fan tax scandal had had a “really huge” impact on Khorgos.

“I had [industry] friends who went to Khorgos and told us not to film there in future, because we were likely to encounter difficulties,” she said.

“Tax avoidance in China is a huge problem. Any company can legally avoid tax [through loopholes … but] as this is on such a massive scale and someone leaked it, the government is now seriously investigating it.”

Khorgos, which has a population of just 100,000, was designated a special economic development zone by the state government in 2011 because of its position along the route of the “Belt and Road Initiative” – President Xi Jinping’s pet trade and infrastructure development plan. It is also the world’s biggest dry port and serves as a gateway to central Asia.

To attract companies to the zone, local authorities offered all new arrivals a zero per cent corporate income tax rate for their first five years. The move worked and a flood of companies, including hundreds from the entertainment sector, headed west.