DALIAN, China -- Investors panned China's film stocks on Monday in the wake of tax evasion allegations against one of its most famous actresses and an investigation that could widen the scandal.
The scandal started May 28 when former Chinese Central Television host Cui Yongyuan posted pictures of two movie contracts belonging to actress Fan Bingbing on the microblogging platform Weibo.
The contracts were for the same film but with markedly different salaries, leading Chinese netizens to speculate that the "X-Men" actress was using separate agreements to avoid taxes by disguising her income.
Fan's studio called the post slander on May 29, and the controversy seemed to fade. But the scandal was rekindled Sunday amid reports that the State Administration of Taxation ordered an investigation and would punish any offenses.
The news sent shock waves across the stock market Monday. Film studios like Huayi Brothers Media and Zhejiang Talent Television and Film sank by almost the daily limit of 10% at one point. More than 20 movie theater chains and other related stocks also fell.
The practice of using so-called "yin yang contracts" to hide income is reportedly common throughout China's film business. Cui, who is well-connected in the industry, said that he has a "drawer full of contracts" and has been flooded with calls from entertainers and directors pleading with him not to make the agreements public.
China's film industry has expanded as the country's middle class grows and is expected to surpass North America as the world's largest movie market soon. Box office revenue rose 15% last year to 52.3 billion yuan ($8.16 billion).