Disney and its Marvel Studios unit announced that it will co-produce Iron Man 3 in China with the DMG Group.  Yes producing films in China is cheaper, but the real reason behind this announcement is that Disney and Marvel want a share of the growing Chinese market.  China has a tough import quota on foreign films with typically fewer than 40 per year allowed in Chinese theaters.  But for films that are chosen, exposure in Chinese theaters can provide a big boost to the bottom line.  James Cameron’s Titanic 3D has already made twice as much ($88 million) in China as it has here, and last year’s Transformers: Dark of the Moon took in a solid $145 million in China, 18% of the film’s overseas earnings.

 

According to The Hollywood Reporter, the DMG Group has excellent ties with the Chinese government run State Film Agency, connections that can help with production and with getting the final product into Chinese theaters.  DMG will help Disney and Marvel “localize” the film so that its content resonates with Chinese audiences.  For example Iron Man 3 will feature Oscar-winner Ben Kingsley in the role of the film's chief villain (see "Ben Kingsley in 'Iron Man 3'").  Many observers speculated originally that Kingsley might play the notorious Iron Man villain, the Mandarin, but if that is the case, it likely won’t be the original “Cold War” version of the character who worked closely with China’s communist government as he battled Tony Stark.

 

If Kingsley does play the Mandarin, which appears less likely now (though not necessarily impossible), it will present the screenwriters with the problem of how to frame a Chinese villain in a movie about a western superhero that the studio is hoping will have a major appeal to Chinese audiences.