Hollywood has lately been catering to Chinese audiences, as well as China’s government, which only allows 34 foreign films into the country every year, privileging those that fit its ideology or incorporate Chinese actors and locations in China.

But that’s only part of the reason why Michael Bay, the American filmmaker who never met an explosion he couldn’t make more dramatic, chose to set the next Transformers movie in China, film much of it in China, hire a famous Chinese actor as one of its leads, and conduct a reality show to select Chinese extras for the film.

Paramount, the US studio behind the film, is doing all that and partnering with a Chinese television company, China Movie Channel, to increase the portion of the profit it can take from every showing of the movie in China (43% instead of the usual 25%, as mandated by the government). That’s important because the Chinese film market is booming, with box office revenues up 36% in 2012 from a year prior, to $2.7 billion. China is projected to be a bigger market for films than the US by the end of this decade.

A way to combat Chinese piracy

Digging deeper, it’s clear that Paramount’s partnership with China Movie Channel, which is owned by the Chinese government and has previously been responsible for little more than a string of unremarkable TV dramas, has another side to it: a potential end-run around the problem of rampant piracy.

The solution is called Jiaflix, which has been described as the Netflix of China. Jiaflix has yet to launch, but when it does, the service will have an exclusive deal with—you guessed it—China Movie Channel. Skeptics aren’t sure how a Netflix clone, even one affiliated with the Chinese government, will fare in piracy-happy China, but the company has said that it is developing “a program to combat Internet piracy in China.”

That would sound absurd if China Movie Channel weren’t a state-owned company, but because it is, the statement suggests that Paramount might have more leverage than usual when it comes to cracking down on piracy.