NEW YORK -- Huayi Brothers, the film studio that sits atop China's entertainment industry, welcomed the Chinese Communist Party into its operation this week.

At a joint ceremony Monday, Huayi representatives accepted a golden tablet from the party after establishing a Communist Party committee within the company. Cao He, former head of public relations at Huayi, will lead the committee as the party secretary, Xinhua News Agency reported Friday.

Huayi Brothers will "work with the party over films' productions in every way," said Cao, adding that the studio will ultimately "integrate the party's achievements into film and television."

The move is seen as yet another example of China's ruling party tightening its grip on the entertainment industry. It comes after a rough year for the industry, with last-minute cancellations of shows, tax inspections and the drying up of investments.

The Shenzhen-listed Huayi has especially suffered heavily, reporting a loss of 1.09 billion yuan, or $158 million, in 2018.

After former state broadcaster CCTV anchor Cui Yongyuan blew the whistle on famous Chinese actress Fan Bingbing and award-winning director Feng Xiaogang last year for using "Yin-Yang contracts" to evade taxes, Huayi, which often produces Fan and Feng's films, came under fire as well. The company's film "Cell Phone 2," directed by Feng and starring Fan, has not secured a release date since production was completed in July last year.

Huayi's troubles have extended into this year. Huayi was set to debut its $80-million blockbuster "The Eight Hundred" as the opening film of the prominent Shanghai International Film Festival on July 5, just days after the Communist Party's 98th anniversary on July 1. Huayi's CEO Wang Zhongjun had high hopes for the big-budget World War II film -- the first Asian film to be shot entirely using IMAX cameras -- that tells the tale of Chinese heroes during the Sino-Japanese War.

But those hopes were dashed on June 25 after the company posted on Chinese social media platform Weibo that the film's premiere was indefinitely postponed because of a technical issue and a new release date would be announced later. The shocking and costly withdrawal drew speculation in the industry, with many suspecting the cancellation was because of the film's portrayal of Communist-rival Nationalists as heroes.

"The Eight Hundred" was not the only film that was canceled at the eleventh hour. Well-known Chinese director Derek Tseng's "Better Days" and "The Last Wish," another Huayi film, have also delayed their release date due to "technical issues."

Without movies hitting the theaters during the summer blockbuster season, Huayi lost its chance to boost revenue. On Friday, the company predicted that it will lose over $43 million in the first six months of 2019.

Whether the lack of cash pushed Huayi to establish an in-house party committee, or it was forced to do so, the company's domestic operation should expect a smoother outcome.

"It is pretty clear that this would be in their best interest, having had the issue with 'The Eight Hundred' and the tax scandal," Aynne Kokas, author of "Hollywood Made in China" and professor of Media Studies at the University of Virginia, told the Nikkei Asian Review. "I think we will see more companies feeling the pressure [to do the same], both from Huayi's decision and the general environment in China right now."

Fergus Ryan, a former Huayi employee and now an analyst at the International Cyber Policy Centre at the Australian Strategic Policy Institute in Canberra, said "it is unusual that a company would publicize the development so openly."

The reason, he said, "could be because Huayi has lost a considerable amount of money in recent years and their efforts to claw back that money are being hampered by the censors. By developing a closer relationship with the party, the company probably hopes to avoid costly censorship issues."

People watch a movie at a Wanda Group's Oriental Movie Metropolis in Qingdao, Shandong province. China is set to overtake the U.S. as the world's largest movie market in the next few years. © Reuters

Under President Xi Jinping, the Communist Party has been strengthening control over the private sector. In 2017, at least 288 of the 3,314 Chinese companies listed on the Shanghai and Shenzhen stock exchanges revised corporate charters to allow a deeper management role for the party, according to Nikkei research. The changes included acknowledging a central role for the party and establishing internal party committees to serve as consultants.

Tech giants such as Baidu, Tencent Holdings, Alibaba Group Holding, JD.com, Huawei Technologies, Xiaomi, Douyu, Didi Chuxing and over 1.58 million other companies have set up internal party committees, although it is unusual for the party to set up shop inside an entertainment company.

"The CCP's determination to control all expression of opinion in China has reached extraordinary heights. It is an expression of the party's growing paranoia," said Clive Hamilton, author of "Silent Invasion" and professor of Public Ethics at Charles Sturt University, in New South Wales, Australia. "Film companies want to make money and they will do whatever it takes. But Huayi will be regarded with skepticism in the West."

The Chinese government also has state-owned film enterprises, such as China Film Group and Huaxia Film Distribution, which inspect scripts and grant permits for foreign films to enter China. Domestic films and shows need to secure a license with the Radio and Television Bureau to be released and the agency has the authority to ask the companies, such as Huayi, to reshoot certain scenes. With the internal party committee likely becoming a part of Huayi's decision-making process, the company's content will likely get the green light.

"This will definitely have a chilling effect on the type of content that will come out of Huayi and its partners," Kokas said. "However, this is in the context of the increasingly limited scope of activities of Chinese filmmakers due to censorship regulations. [Although] this is a significant transformation, the state for content production has already been shrinking."

Leaning toward the government's will and producing content that pleases the Communist Party has long been an unspoken shortcut to success in China's film industry, with many producers and directors having made their names this way.

Hong Kong director Dante Lam's "Operation Mekong" in 2016 raked in $173 million and his "Operation Red Sea" in 2018 brought in $579 million, according to Box Office Mojo's data. Both blockbusters are big-budget patriotic movies that showed off the Chinese government's military power and influence abroad. Lam collaborated with the Chinese navy in "Operation Red Sea," which featured real warships.

Action star Wu Jing's "Wolf Warrior" and its sequel were similar to Lam's films, featuring the actor fighting foreign mercenaries and protecting workers at a Chinese factory in Africa.

Attempts by entertainment companies to please the party has especially increased this year. Tencent Pictures launched a campaign on Weibo to coincide with its annual conference in June, celebrating the party's anniversary and expressing the tech giant's willingness to be a positive force and lead the industry's transformation to align with the party's vision.

Although many are eager to get on the party's good side, the cancellation of "The Eight Hundred" other blockbusters have confused Chinese filmmakers over where exactly the red line lies.

Patriotic action films such as "Operation Red Sea" and "Wolf Warrior" are no longer endorsed by the party as they praised China's military operations overseas, according to people familiar with the matter. But no one seems to know what the party approves of now.

"Some Chinese film directors and producers who believe they have done everything to stay on the right side of the censors have found that they have somehow transgressed. Some are mystified, and now feel that they don't know what the red lines are," Hamilton said. "It's possible the party is adopting a deliberate strategy of vagueness in order to keep everyone guessing, and therefore nervous. The only response is to retreat to ultrasafe topics, or stop making films."

Some companies have decided to only produce films and television shows in the genre of romantic comedy and family drama to avoid cancellations, according to people familiar with the matter. Filmmakers will also be very careful about their works from this year to 2021, when the Communist Party will celebrate its 100th anniversary. More restrictions on content are expected, according to people familiar with the matter.

As companies try to grasp the red line, Huayi's new goals, according to the country's state-run news service, shed some light on the content that will be coming out of China.

"In the next three years, Huayi Brothers will produce one to two films in each of these four topics -- Communist history, traditional culture, One Belt One Road and coming of age," reported Xinhua.