When news spread in February that Warner Bros.’ The Batman had been granted an official release date in China of March 18, just two weeks after its North American debut, it was cause for considerable relief among executives engaged in the international distribution business. No Hollywood superhero movie had made it to China in more than two years, thanks to pandemic delays and a mysterious clampdown on U.S. tentpole releases by Beijing’s film regulators. Now, at last, a top-tier title — one with the Caped Crusader, no less — could remind the industry of what a Hollywood blockbuster was capable of in the world’s largest theatrical market.

Alas, it was not to be — at least not as anyone would have hoped. Hollywood’s streak of bad luck in the Middle Kingdom continues.

The week before The Batman was set to unfurl, China was hit with its worst COVID-19 infection flare-up since the pandemic began in Wuhan in late 2019. Cinemas in such major cities as Shenzhen and Shanghai shuttered, and a smattering of smaller outbreaks in some 28 provinces cast a chill over consumer activity nationwide. After bowing to $134 million in North America, The Batman opened to just $12.1 million in China and is projected to finish its run in the country with about $22 million.

If there’s a silver lining in the present moment, it’s that U.S. theatrical product has begun to resume its flow into China.

“The Hollywood studios can at least be a little more optimistic that their movies are being introduced into the country again,” notes MKM Partners analyst Eric Handler.

In 2021, just 20 revenue-sharing U.S. titles were released in Chinese cinemas, compared with 31 U.S. tentpole releases before the pandemic, in 2019. Hollywood’s own COVID-related postponements were the chief hindrance for the studios in the first half of last year, but by summer, their distribution pipelines were pumping again. By then, however, local politics surrounding the 100th anniversary of the Chinese Communist Party dictated that Beijing regulators would leave American product on the shelf in favor of patriotically themed Chinese fare. Surging nationalism and political sensitivity among the local public, encouraged by the fraught diplomatic relations between Beijing and Washington, later derailed the release prospects of a slew of bankable Hollywood movies in the final stretch of the calendar, including Marvel tentpoles Black Widow, Eternals and Shang-Chi and the Legend of the Ten Rings from Disney, Space Jam: A New Legacy from Warner Bros., and Venom: Let There Be Carnage and Spider-Man: No Way Home from Sony — all fan-favorite properties that collectively could have earned hundreds of millions of dollars.

In recent weeks, China has begun to reopen the gates. Sony’s Tom Holland starrer Uncharted opened March 14 (also hamstrung by COVID-related theater shutdowns, it is projected to finish its run with around $15 million), and additional dates were given to Roland Emmerich’s indie-financed disaster film Moonfall (which opened March 25 to $9.7 million), Sony’s animation sequel Hotel Transylvania: Transformania (April 3) and Warners’ Fantastic Beasts: The Secrets of Dumbledore (April 8).

In the case of Matt Reeves’ The Batman, however, some analysts, upon closer examination, see additional cause for concern. More significant than the woeful results, which could be explained by the circumstances, are the earnings projections for the film that preceded the COVID flare-up. Early tracking suggested an opening in the $25 million to $30 million range — arguably healthy by today’s diminished standards but lowly compared with contemporaneous Chinese films and the performance of any well-received Hollywood superhero title just a few years ago. Marvel titles have regularly earned vastly more, but even the comparatively poorly received Justice League opened with $52.1 million in 2017, Aquaman debuted with $94.2 million in 2018, and Christopher Nolan’s The Dark Knight Rises brought in $52.8 million way back in 2012, when China had about 80 percent fewer screens than it has today.

The low earnings expectations for The Batman before the latest COVID outbreak suggest a continuation of a trend of Chinese audiences’ waning enthusiasm for Hollywood storytelling as the country’s domestic film sector churns out gradually more accomplished action spectacles of its own. In 2012, Hollywood films amassed a 48.2 percent share of China’s box office revenue, according to data from consultancy Artisan Gateway. By 2016, the U.S. share had slipped to 36 percent, and in 2021 it was 12.3 percent.

Hollywood’s increasingly exiguous China earnings of the pandemic era are all the more striking in comparison to local blockbusters’ relatively enormous sales over the same period. During the past two years-plus, only two Hollywood films have earned at least $100 million in China — Legendary Entertainment’s Godzilla vs. Kong and Universal’s F9: The Fast Saga. Meanwhile, more than 20 Chinese titles have hit that milestone.

The biggest Chinese movies of the past several years, by far, have tended to be “main melody films,” a genre unique to the Chinese industry that refers to quasi-propagandistic movies embodying the official ideologies of the Chinese Communist Party. The top local hits of the past year are representative: The Battle at Lake Changjin, which earned $899.4 million in 2021, and its sequel, The Battle at Lake Changjin: Water Gate Bridge, which has brought in $638 million since its Feb. 1 release. Both films are emotionally rousing war epics glorifying China’s victories over U.S. forces during key episodes in the Korean War (known in China as the “War to Resist U.S. Aggression and Aid Korea”).

Studio insiders and box office analysts are more varied than usual in their interpretation of the significance of such trends.

At a time of dangerously fraught U.S.-China diplomatic relations, some analysts worry that the same nationalistic currents at work among the Chinese public that have boosted main melody films into mega-blockbusters could be chipping away at the hard-won audience enthusiasm for imported Hollywood releases — a reality that could become a headwind that the U.S. industry experiences for a generation.

“The recent state-backed production focused on main melody films, which extol communist values, adding a layer of uncertainty for all non-main melody product, including both Chinese-language product as well as imports that include the major U.S. studios,” says Rance Pow, president of Artisan Gateway.

Hollywood product may also be experiencing fresh challenges because of a continuing diversification of tastes between the Chinese audiences living in the country’s largest cosmopolitan cities (commonly referred to as tier 1 and tier 2 cities) and the hundreds of millions who reside in less developed, more provincial urban centers (known as tier 3, 4 and 5 cities).

“The China business increasingly hinges on the question of what will deliver for sophisticated viewers in tier 1 and tier 2 cities — and will it also deliver for people in tiers 3-5,” notes a studio insider. “The Battle at Lake Changjin can easily do that, but there’s a smaller pool of Hollywood titles that play that way.”

As many critics have suggested, Reeves’ sophisticated noir approach to The Batman brought something fresh to Gotham, which likely played a strong part in the film’s healthy earnings in North America, Europe and elsewhere. That same sophistication also appears to have pleased filmgoers in China’s biggest urban centers — The Batman started its run with strong social scores on China’s big ticketing apps, as the core comic book fanbase turned out in support. But it’s unclear whether Reeves’ brooding film ever would have connected with filmgoers in the more far-flung regions, whose embrace is increasingly necessary to create a local blockbuster in the country.

“The industry is facing enormous challenges everywhere, with COVID, the streaming element and all of the difficulties of doing a successful global theatrical rollout — and then on top of it all, you’re also supposed to win two very different markets within China,” adds the studio insider. “It’s a very difficult needle to thread right now.”

After years of industry hype over the scale and potential of China, some studio executives remain vexed over how speculative their business in the market has always been, no matter how large the headline box office hauls. Under a trade agreement established in 2012, the U.S. studios are entitled to only 25 percent of box office sales revenue for their films in China, compared to 40 percent to 50 percent in other major markets. Compounding the uncertainties of doing business in a highly censorious and politicized authoritarian state, the studios have never had control over their own release dates and have been at the mercy of Beijing regulators on all matters of scheduling. Thus, modeling box office potential in China during the greenlighting process has always been a matter of guesswork for the studios.

“We sometimes put a guess in the China column, but more often it is blank or we run two models — with and without China,” says a veteran financier. “The majors assumed that someday China would be a huge market for our product— the biggest on the planet. The economic bond that existed between the U.S. and China was growing, which also made the world safer. Today, the economic reliance has changed for the worse. Currently, we believe that China no longer cares about being the No. 1 theatrical market in the world — they just want nationalistic product.”

“China seems to have turned its back on Hollywood,” says one studio exec, adding that Hollywood’s myriad efforts to more deeply engage with the Chinese industry through co-productions and other activities only served to help local studios learn how to make better blockbusters of their own.

Yet even with just a 25 percent share of returns and all the operational constraints, China continues to offer the allure of major windfalls for the biggest Hollywood hits.

“For now, the China market remains at once too great an opportunity to disregard and too unpredictable to rely on,” says Pow.

The next big litmus test for the market will come with the release of Disney and Marvel Studios’ Doctor Strange in the Multiverse of Madness, now scheduled for May 6 in the U.S. but still undated in China. If approved, it will break the mysterious streak of Marvel movies being shunned by Chinese regulators and provide a clear point of comparison for the local audience, which turned out in droves for the first Doctor Strange, a 2016 film that earned $109 million of its $677 million worldwide haul in China. Analysts will then await further indicators from Thor: Love and Thunder, Top Gun: Maverick and Jurassic World Dominion in the early summer.

“There’s so much noise in the system right now, it’s become very tough to connect the dots in China,” adds MKM Partners’ Handler. “Hopefully, over the coming months we’ll finally get a clear sense of where the business is headed.”

Pamela McClintock contributed to this report. This story first appeared in the March 30 issue of The Hollywood Reporter magazine. Click here to subscribe.