‘Yin and yang’ – the sequel

Forbes recently reported that the former wrestler Dwayne Johnson was the world’s highest-paid actor for the second consecutive year in 2020, raking in $87.5 million even during the pandemic.

The salary included a huge pay cheque of $23.5 million from Netflix for his role in the upcoming film Red Notice.

The surprising news this month is that actress Zheng Shuang was paid even more than Johnson got from Netflix for one TV role in China. Last week Zheng’s former partner Zhang Heng posted screenshots on weibo of alleged chats between him, Zheng and her parents, where they discussed the fee for her role in the unaired drama A Chinese Ghost Story. The screenshots suggested that the actress had negotiated a spectacular Rmb160 million in pay – that is, $24.7 million – with studio Beijing Century Partner Culture and Media.

Zheng’s remuneration works out at about Rmb2 million ($308,898) for each day of filming. But the problem for her is that back in 2018, China’s National Radio and Television Administration ruled that actors’ salaries should not be more than 40% of a programme’s production costs. Subsequently, the three largest online streaming platforms iQiyi, Youku and Tencent Video also promised to cap salaries at no more than Rmb1 million per episode, with total salary not exceeding Rmb50 million. So it seems that Zheng’s stratospheric pay has violated the rules.

The suggestion of improper behaviour comes just months after Zheng was embroiled in a surrogacy scandal, when she was accused of abandoning two children born to surrogate mothers in the United States (see WiC526). That story was again leaked to the media by her embittered ex-partner Zhang (who is in the US, looking after the kids).

In his more recent weibo post, Zhang made further allegations, saying that Zheng had sidestepped the salary cap by signing two different contracts.

The first – which was submitted to the tax authorities – showed a Rmb48 million sum. But the remaining amount went into a covert contract with a company controlled by her mother.

If that ruse sounds familiar, it’s because another starlet was caught doing something similar in the past. In 2018, Fan Bingbing was found to have received Rmb60 million in payment for a movie but declared it as Rmb10 million for tax purposes via what has come to be known as as a ‘yin and yang contract’ (see WiC412).

Fan was later detained by authorities and paid punitive fines for the deception. But her career went downhill and she has never regained her former popularity.

Zheng may now risk a similar fate. The tax authorities in Shanghai are already investigating and regulators in the media have also opened an investigation into the potentially fraudulent contracts, reports state broadcaster CCTV.

The regulator added that it was determined to control production costs for TV dramas, including payments made to actors.

Zheng issued the standard statement that she would fully cooperate with the authorities in the investigation.

“Everyone agreed that capping the pay of ‘high-traffic’ stars is going to be beneficial for the development of online streaming platforms. That way, their costs to acquire content should be lower, which means that TV and film production companies can spend more money on screenplays and props, and so forth. Audiences, too, can watch fewer crappy dramas,” 36Kr explained.

“However, Zheng Shuang’s sky-high salary proves that this rule is probably wishful thinking. The situation of ‘high-traffic stars’ [that is, celebrities that have huge online followings] kidnapping the TV and film industry has not improved in the last three years and has become even more serious.”

Insiders also revealed that in addition to yin and yang contracts, celebrities have been structuring deals through companies in regions that have more beneficial tax policies. One popular destination is Khorgos in the Xinjiang Uighur Autonomous Region, which offers corporate tax exemptions for an initial five years and a 50% deduction for the following five. Another popular tactic is to hire relatives as executive producers on the series in question and funnel some of the salary to them.

News of Zheng’s pay packet, which emerged just ahead of the Labour Day weekend, quickly got coverage on social media. The glaring disparity of the fortunes of some of the biggest stars and China’s everyday workers did not go unnoticed. Others lamented that the actress could buy a house after working for just two days, while it would take them decades to be in the same position. “If you get paid Rmb5,000 a month, you need to work for 2,666 years to make what Zheng earned for one TV show,” one netizen fumed.

But Zheng’s main offence – in the eyes of many netizens – was to commit dual-contract fraud even after Fan’s high-profile scandal. “She tried to evade taxes and despite the salary cap, knowingly committed a crime while fully understanding the consequences… Time and time again celebrities push the moral boundaries. Given how ‘money-crazy’ these people are, they should be lawfully punished,” one commentator thundered.

“We need to crack down on these fraudulent contracts to protect the dignity of the law and peoples’ belief in justice,” added Hu Xijin, editor-in-chief of the Global Times. “The market doesn’t exist in order for a few celebrities to gain wealth unscrupulously.”

News about the investigation into Zheng rippled immediately across the entertainment sector. Almost overnight, 75 of the country’s leading stars closed down more than 200 companies said to be connected to them personally. Actor Huang Xiaoming was a shareholder of 43 of them, while actress Zhang Ziyi controlled 29, pointed out Caijing.

The fact that Beijing Culture, a studio that reported recurring losses of Rmb767 million and Rmb2.6 billion in 2020 and 2019 respectively, was willing to pay Zheng such an exorbitant amount showed its faith that it could still make money from the series, Chief Entertainment Officer surmised. Indeed, the studio has reported that the broadcasting rights to A Chinese Ghost Story had generated advance sales of Rmb358 million.

But a combination of the surrogacy scandal and now Zheng’s potential punishment for tax evasion means that there is little chance that A Chinese Ghost Story will ever be broadcast, which threatens a major write-off for Beijing Culture.

In the meantime China’s TV production studios will have to review their contracts with other stars or risk being caught up in the same kind of scandal.

“Even at a time when film and television companies are already poor, they still have to take risks in setting up ‘yin and yang contracts’ and paying huge sums of money to the artists. Moreover, the bargaining power of the biggest names in the business has not weakened, even after Fan Bingbing was severely punished. If anything, it has become even stronger because of the expansion of the ‘fan economy’,” 36Kr concludes.

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