Stocks of entertainment companies and production houses in China are having a sorry week after authorities in China announced they were launching an investigation in the sector following allegations of tax evasion.
China's State Administration of Taxation said in a statement earlier this month that it had instructed tax authorities in Jiangsu to carry out investigations following news concerning the use of so-called "yinyang contracts" and related tax issues among those involved in the film and television industry.
The use of "yinyang" contracts raised by mainland authorities involves the practice of drawing up more than one contract for an agreement.
In such a situation, a contract stipulating real agreement terms will be drawn up alongside another contract that reflects a smaller earnings figure, with the latter document subsequently declared to the authorities to allow for lower tax payment, according to a Reuters report.
The department added in its notice that those found violating tax regulations would be dealt with according to the law.
Shares of production companies fell sharply on Monday, with many names still on the back foot by the end of the week.
Shares of Zhejiang Talent Television and Film were down 2.85 percent Friday afternoon, lagging the Shenzhen composite, which traded lower by 1.22 percent. The benchmark Shanghai composite was down 1.37 percent. Zhejiang Talent was down around 13 percent in the week.
Meanwhile, Wuhan DDMC Culture, which is involved in both sports and television productions, hovered around the flat line, but its stock was still down roughly 10 percent this week.
Huayi Brothers, a film and television production company, advanced 0.71 percent during Asian afternoon trade, but those gains were not enough to erase steep losses at the beginning of the week. Huayi Brothers stock was down more than 13 percent for the week.