Chinese Peril

Tensions flare between US and China, this time in Hollywood
Rebecca A. Fannin

China investment into overseas transactions doubled last year to peak at $225 billion, according to data firm Dealogic, which tracks deals across real estate, tech, industry and Hollywood. 

Now Chinese acquisitions overseas have slowed to a small fraction of that former record, especially when it comes to Hollywood. 

At least one dozen cross-border, China-U.S. deals in the tech, media and entertainment space have dried up over the last six months, according to a studio executive with close ties to investment bankers and private equity dealmakers involved in these transactions.

Just take note of some of the high-profile deals that have been scrapped over the last year.
In March the $1 billion deal by Chinese real estate and entertainment conglomerate Dalian Wanda Group to acquire Dick Clark Productions, producer of the Golden Globes and American Music Awards, collapsed. 

Regulatory pressures, as well as payment issues from Wanda's side, were the cause, according to one principal involved in the deal.
Other China-to-Hollywood deals are in trouble or have been abandoned. 

A $1 billion, three-year deal by Chinese firms Huahua Media and Shanghai Film Group with Paramount Pictures was intended to help the studio finance films and get released and marketed in China, but has stalled since former Paramount head Brad Grey was forced out, though Paramount has insisted in recent press reports it will still happen.
In a related entertainment and distribution deal that was meant to capitalize on the growing trend toward live streaming and internet distribution of content, a $2 billion agreement by Chinese tech and entertainment conglomerate LeEco to acquire LA-based TV maker Vizio is officially off due to "regulatory headwinds." 

The deal's collapse in early April was the result of tighter currency controls and a crackdown on China-U.S. deals, in addition to a cash crunch at LeEco, which has been facing financial difficulties and retrenching after rapid expansion into smartphones and electric vehicles, according to deal makers involved in the industry. 

The two companies will seek to collaborate on content and distribution now that the acquisition is off.
Meanwhile, the Middle Kingdom's moves into Hollywood have been facing scrutiny on Capitol Hill as concerns grow about too much influence and control on American content by China, a market that blocks social media services Facebook, Twitter and Instagram on the Chinese internet. 

In the run-up to the presidential election, 17 lawmakers pushed for Wanda to be investigated for violations to the Foreign Agents Registration Act and require it to publicly disclose its relationship to the Chinese government. 

More recently, New York Democratic Senator Chuck Schumer has voiced concerns over Wanda's Hollywood dealmaking.
"No Chinese buyers are coming to the table," says Chris Fenton, a trustee of the U.S.-Asia Institute in Washington, D.C., and president of DMG Entertainment Motion Picture Group in Los Angeles and Beijing. 

"No Chinese entity wants to test this," he said, referring to the potential limits of regulatory scrutiny. Most of Chinese investment in U.S. assets has dried up in the final hours of negotiation," he said. Fenton helps organize congressional visits to China. 

This summer he has added a trip focused on the high-profile media and entertainment industry.

Behind the Sino-American skepticism
Issues have been brewing on both sides of the ocean over China-Hollywood deals. 

As China has turned to Hollywood as part of its outward reach and bid for soft power, such transactions have been ensnared by Chinese regulators. 

China policymakers have been closely examining transactions that cut across industry lines and command big price tags, while the Chinese government has tightened controls over capital outflows to shore up foreign currency reserves and gains in the yuan currency.
"The Chinese government crackdowns have made it extremely difficult to get money out," said Rob Cain, president of advisory firm Pacific Bridge Pictures, focused on United States and China entertainment markets.
Hollywood is also becoming more cautious about Chinese capital, Cain said, and also more cautious after earlier — naive — infatuation. 

"There's a lot of skepticism now by Hollywood about these deals," he added, continuing, "On the U.S. side, there's very little sophistication about how to vet potential investors. You have to have dedicated teams and be on the ground in China. It takes a lot to learn the market."

Wanda's Hollywood plans fall through Sunday, 12 Mar 2017

Wanda had led the Hollywood empire building in 2015 by acquiring American film production house Legendary Entertainment, co-producers of "Jurassic World" and "Godzilla" in a deal for $3.5 billion in cash, adding to a U.S. portfolio that included theater-chain giant AMC Entertainment and a deal to finance films with Sony Pictures. 

China's tech titans Alibaba and Tencent have also been on the hunt in Hollywood for inroads into this glamorous and high-profile sector, just as these Chinese leaders have in Silicon Valley for the past few years for technical know-how.
In 2016, Tencent invested in movie studio start-up STX Entertainment, while Alibaba announced a minority stake in Hollywood director Steven Spielberg's Amblin Partners to produce, distribute and finance films globally and in China. 

Alibaba chairman Jack Ma has said the e-commerce company will invest $7.2 billion over the next three years in Hollywood pictures.
"China absolutely wants to have its own home-grown film business," said Elizabeth Dell, a content producer at Two Camels Films and head of the China task force of the Producers Guild of America.

Collaboration may be the hottest ticket
The infatuation between China and Hollywood probably won't fade soon. 

As China's middle-class population has increased and second- and third-tier cities have seen dozens of new cinemas open, China's box-office revenues have soared. 

Annual revenues in China movie tickets have been growing by 35 percent each year since 2011, according to Chinese media and entertainment researcher EntGroup in Beijing. 

It's a frontier market that can't be ignored while U.S. movie ticket sales are relatively flat. 

China is on track to become the world's largest box-office market.
Moreover, Chinese companies are luring filmmakers to China to make movies. 

Wanda's billionaire chairman Wang Jianlin created a stir in Los Angeles last October by announcing a 40 percent subsidy for Hollywood to come to China to create films at its state-of-art movie production facility in the coastal Chinese city of Qingdao. 

A number of companies agreed to shoot there, including Arclight Films and Lionsgate and China Media Capital-backed Infinity Pictures.
Hollywood has turned to co-productions with a China partner to avoid a quota system that limits big-budget imported feature films to 34 per year and limits foreign studios from keeping more than one-quarter of Chinese box-office revenues.
A recently released U.S.-China co-production — The Great Wall, by Universal Pictures, Wanda's Legendary and a LeEco film division — was looked at as a trendsetting deal. 

It was the most expensive feature ever shot in China, and it starred Matt Damon. 

But the film, which melded Chinese action sequences with Hollywood-style romances, did not go over well at the box office in China or the United States, and losses are expected to hit $75 million.

Per un pugno di renminbi

With an eye on China, greedy Hollywood is already self-censoring in its pursuit of profits.
By Matt Lewis

President Donald Trump has spent a significant amount of time talking about our trade balance with China and how American businesses have shipped jobs overseas. 

However, the real story may be about our stories.
I’m speaking of Hollywood: the industry that has done more to promote and export American culture than any government program ever could. 

But that could be changing.
Few Americans realize that a Chinese company, Dalian Wanda Group, is the world’s largest cinema operator (the company owns AMC Theaters and Hoyts Cinema). 

Even fewer probably realize that this same Chinese company owns Legendary Entertainment (Jurassic World and Interstellar)—and that their plans include the acquisition of one of the “Big Six” movie studios.
It doesn’t take the imagination of a La La Land auteur to envision the potential negative consequences.
Last September, 16 members of Congress sent a letter to the head of the Government Accountability Office, asking this question: “Should the definition of national security be broadened to address concerns about propaganda and control of the media and ‘soft power’ institutions?” 

And they’re not alone in their concern. 

A clandestine group called “Wolverine Entertainment” created a Kickstarter campaign to fund a documentary about Chinese influence in Hollywood.
While there are reasonable concerns about China exporting overt propaganda via their increasing control (through a private company) of production and dissemination, we are already witnessing a less-paranoid scenario: self-censorship in Hollywood in pursuit of profits.
Hollywood is understandably interested in reaching an audience of more than a billion Chinese consumers, and China’s increased media presence is already affecting the types of movies that are green-lighted. 

As the Washington Post reported, “the Chinese government and its support of censorship now has a surprisingly big hand in shaping the movies that Americans make and watch. Films like ‘Transformers IV,’ ‘X-Men: Days of Future Past,’ ‘Looper,’ ‘Gravity,’ ‘Iron Man 3’ and many more have adapted their plots to woo Chinese censors and audiences.”

Comedian Stephen Colbert has mockingly named this phenomenon the “Pander Express.” 

But he wasn’t joking when he said that “It’s only natural for American movie makers to try to please the cultural gatekeepers of the Chinese government.”
In The Martian, China saves Matt Damon—a plot point that spurred Colbert’s commentary. 

In fairness to the filmmakers, the Chinese involvement tracks well with the book’s narrative. 

However, this likely made for a nice selling point when it came time to pitch the film to investors.
Interestingly, Damon is now starring in a Chinese production called The Great Wall. 

As Forbes contributor Scott Mendelson notes, “the entire arc of the movie is watching a white American realize that [the] Chinese army and the Chinese culture is [sic] inherently superior.” 

He continued: “It’s amusing to see a Chinese/American blockbuster where the would-be virtues of western individualism are all-but-villainized.”
What we are seeing is a feedback loop where American movie producers are attempting to appease the Chinese market. 

Why else would the remake of Red Dawn voluntarily swap villains, replacing the Chinese with North Koreans?
Part of the reason for this is that there is a lot of competition, not merely to reach China’s large population of moviegoers but also because China has a quota for how many foreign films they allow in. 

This might change. 

According to a recent report, “government officials and industry representatives from China and the U.S. meet to renegotiate trade terms later this month… .”
But who is empowered to negotiate such a deal? 

“This is exactly why General Michael Flynn is in trouble,” a film producer, speaking on the condition of anonymity for fear of backlash from studio executives, told me. 

“It is against the law for American citizens to negotiate deals with other countries for this very reason—these deals could have a catastrophic impact on the American economy [speaking here of unionized movie crews] and the best and brightest example of our First Amendment to the world.”
It is highly unlikely that anyone will face prosecution for violating the Logan Act, but the notion that a single entity could own both movie studios and theaters might be seen as a violation of anti-trust laws.
Regardless, concerns about incipient propaganda and censorship are the big story. 

The media we create and consume inform our perceptions about life. 

Stories matter. 

Narratives help develop our worldviews; over time, these narratives could even influence our decisions.
This is why Joe Biden believes Will & Grace “did more to educate the American public [about marriage equality] more than almost anything anybody has done so far.” 

It is why The Cosby Show gets credit for helping elect Barack Obama. 

This is also why some people worry about violence in movies. 

People who argue that media doesn’t inform our worldview can never fully explain why businesses spend so much money on advertising.
For better or worse (and sometimes both), popular culture changes our perception. 

So what happens if a few generations of Americans are fed a steady diet of films portraying the Chinese as heroic and superior? 

American public opinion is eventually swayed.
Losing jobs to China is a standard talking point for protectionist politicians, but preserving culture is hardly mentioned.

Chinese Peril

Dalian Wanda: China’s Propaganda Puppet
By RICHARD BERMAN
China's Goebbels Wang Jianlin

AMC Entertainment. Carmike Cinemas. Legendary Entertainment. Lionsgate Corporation. Paramount Pictures.
They are mainstays of America’s movie industry, either producing content or distributing it to the masses. 

But these film studios and movie theater chains are tied tighter together through a Chinese businessman with infinite ambitions: Wang Jianlin, the founder and chairman of Dalian Wanda.
To most Americans, Dalian Wanda, a Chinese firm owned by Wang—China’s wealthiest man—remains an unknown. 

Yet Wanda has emerged as a global player determined to consolidate the U.S. movie industry under one parent company. 

In 2012, Wanda bought AMC—the second largest movie theater chain in the country—for $2.6 billion. 

It purchased Legendary—the producer of The Dark Knight Trilogy—for an even heftier $3.5 billion in January of this year. 

Wanda-owned AMC now plans to buy Carmike for $1.2 billion, forming the country’s largest chain with 8,380 screens in more than 600 theaters. 

The company has also shown interest in buying at least a portion of Lionsgate and Paramount—if not all of Hollywood’s “Big Six” studios.
On the surface, Wanda’s motivations are monetary. 

Wang strives to turn Wanda into “a juggernaut” in the movie industry through high-dollar mergers and acquisitions—granting him greater control of major production and distribution channels. 

Wang’s incendiary rhetoric against Disney—one of Wanda’s major competitors in the entertainment tourism space—confirms his relentless pursuit of greater market share. 

In his words: “We want to smash them. It’s not personal—it’s where the interest of the company lies.” (Wang has likened Disney to “one tiger” competing against his “pack of wolves.”)
But his ambitions transcend buttered popcorn and glitzy theme parks. 

A former Communist deputy, Wang has steered at least $1.1 billion in government subsidies to Wanda. 

He has sold company stakes to relatives of China’s most powerful politicians and business executives, including the business partner of former Prime Minister Wen Jiabao’s daughter and relatives of two members of the Politburo—the Communist Party’s principal policymaking committee. 

Qi Qiaoqiao, the elder sister of  Xi Jinping, was also an early Wanda investor.
Wang’s connections to China’s political elite signal his broader agenda: Promote Chinese propaganda. 

In recent years, Xi has vowed to promote China’s “cultural soft power,” specifically in the realm of “international communication.” 

To that end, Communist officials have pledged government support to Wanda and other companies making cultural inroads abroad. 

As Wang admits, the soft-power policy—spreading favorable and stifling unfavorable depictions of China—is “very beneficial” to Wanda’s bottom line.
It blurs the line between Wanda’s interests and the Chinese government’s. 

Shortly after acquiring Legendary in January, company officials called it “China’s largest cross-border cultural acquisition to date.”
With it, Wanda acquires the ability to influence the development of movie scripts, heaping praise onto the Chinese government and tempering criticism where Wang sees fit.
History is rife with examples of movies altered pre-release to appease Chinese censors, which force filmmakers to rewrite scripts according to the Communist Party’s wishes if they hope to gain entry into China’s lucrative market. 

Pixels—the 2015 action-comedy flick—initially depicted aliens blasting a hole in the Great Wall. 

The scene was removed entirely from the final version of the movie. 

Similarly, the 2012 remake of Red Dawn originally featured Chinese soldiers invading an American town. 

Producers changed the invaders into North Koreans without even receiving a formal complaint from Beijing.
Wanda seeks greater sway in the creative process. 

Wang’s company recently bankrolled Southpaw’s $25 million production budget, becoming the first Chinese firm to “solely finance an American movie.” 

And it left fingerprints everywhere. 

According to David Glasser, who helped produce and market the film, “(Wanda was) involved — it wasn’t just a silent investment.” 

Glasser went even further: “They were on the set and involved in production, postproduction, marketing, everything.”
“Everything” includes distribution, which undergirds Wang’s interest in an AMC-Carmike merger. Controlling America’s largest movie theater chain allows the Chinese businessman to dictate much of what gets shown in the U.S.—and what doesn’t. 

It’s no surprise that AMC’s cinemas showed no Chinese films before Wanda’s takeover, yet now put on double-digit productions every year. 

As Wang points out, “More Chinese films should be in…theaters where possible.”
Could that include a new war movie called South China Sea?
All signs point to no.

Chinese Peril

Why DC Started Caring About Dalian Wanda Group and China in Hollywood
By Matt Pressberg

China’s Dalian Wanda Group made its first big splash in Hollywood back in 2012, when it acquired AMC Theaters. 

Since then, the real estate and media conglomerate has been on quite a shopping spree, including buying “Jurassic World” production company Legendary Entertainment for an aggressive $3.5 billion in January — which made Wanda the first Chinese company to own an American studio or production house.
But it was only the past few days when D.C. really took notice — and began pushing back.
The Washington Post published a strongly worded Oct. 5 editorial that raised red flags over the possibility of China’s ruling party using its entertainment assets to spread propaganda.
Also last week, the Government Accountability Office agreed to a request from 16 members of Congress to review the legal powers of a foreign investment committee, and Rep. Jim Culberson sent a letter to the Department of Justice urging it to take another look at the Foreign Agents Registration Act, specifically mentioning Wanda’s entertainment purchases and their potential to be used for “propaganda purposes.”
So why did Washington decide to start paying attention now?
For one, Wanda — and other Chinese firms — are stepping up their investments in Hollywood. 

Co-financing deals between U.S. studios and Chinese partners have been booming for a couple years now, including arrangements such as Lionsgate’s deal with Hunan TV, STX’s with Huayi Bros. and Universal’s with Perfect World Pictures.
This year, in addition to purchasing Legendary, Wanda was also a leading contender to buy a minority stake in Paramount Pictures — before that was taken off the table — and is also in talks to acquire Dick Clark Productions for $1 billion.
Wanda isn’t a typical entertainment company, either. 

Its founder and CEO, Wang Jianlin, is China’s richest man and very close to the ruling party. 

Several individuals with ties to government officials have significant economic interests in Wanda’s businesses. 

Wang has made no secret of his desire to spread “Chinese values” around the world via entertainment, making that point — and criticizing U.S. rivals like Disney — in a blustery fashion that can rub people the wrong way.
But as members of Congress have plenty of issues to occupy their minds and public pronouncements aside from Chinese investments in entertainment companies, one instrumental factor in the recent string of fusillades from Capitol Hill has been a campaign by Richard Berman, the president of D.C. lobbying firm Berman & Co.

Berman started paying attention to the fire hose of Chinese money flowing into Hollywood this summer and had one of his staffers do more research, realizing it was bigger than he thought. 

He then began reaching out to sympathetic legislators.
“We reached out to some people on the Hill that we knew already had an agenda,” Berman told The Wrap. 

“There are people who are predisposed to being suspicious [of China] because of some other issues. And a lot of those people have committee assignments that overlap [with Chinese investment in Hollywood].”
Berman said last week’s events were the culmination of that work, and that someone on his staff had been in touch with Culberson.
“My fingerprints are all over this,” he said.
Berman acknowledged that studios tailoring their product to appease the China’s gatekeepers — don’t expect to see a Chinese villain in the next James Bond film — is primarily a business decision driven by the desire to get into the world’s second-biggest and one of its fastest growing movie markets, but he’s more focused on China’s ownership of distribution outlets.
“The issue of censorship in China is not my concern,” he said. 

“People changing their movies so they can be shown in China is not my concern. The thing that really triggered my interest is the distribution issue. If you control distribution, you control what the retail market sees.”
To that end, Berman pointed out Wanda’s ownership of AMC Theaters, which is currently in talks to acquire Carmike Cinemas — making it America’s biggest theatrical exhibitor. 

He said he had conversations with AMC personnel that didn’t give him great comfort that the theater chain would be free to show movies that the Chinese government didn’t like.
“Wang has been pretty blatant that AMC is owned by the Chinese,” he said.
Berman said he’s doing this “just to make people aware,” adding that he’s satisfied with last week’s Washington Post editorial and the correspondence between members of Congress and the GAO and DOJ.
“I’m not trying to make this a McCarthy-ite type issue; but as far as I’m concerned, it needed to have more light shown on it,” he said.

Media Censorship

Justice Dept. Is Asked to Review Chinese Company’s Hollywood Purchases
By MICHAEL FORSYTHE

Wang Jianlin, chairman of Dalian Wanda Group, in Beijing in August. 

HONG KONG — The aggressive expansion of the Chinese company Dalian Wanda Group into the American film industry drew increased scrutiny from Congress this week as a prominent lawmaker asked the Justice Department to review a spate of recent purchases by the company, which has close financial ties to relatives of senior Chinese Communist leaders.
The congressman, John Culberson, Republican of Texas and chairman of a subcommittee overseeing the Justice Department in the House Appropriations Committee, asked the department in a letter to review Wanda’s acquisitions as part of an effort to overhaul and possibly broaden rules on foreign purchases of United States companies and to review decades-old laws governing foreign agents in the country.
Wanda, now the world’s biggest owner of movie theaters, bought AMC Entertainment Holdings, a chain based in the United States, in 2012 and is bidding to buy its rival Carmike Cinemas. 

In January, Wanda bought Legendary Entertainment, a Hollywood production company, and Wanda’s billionaire chairman, Wang Jianlin, is seeking to buy a major Hollywood studio.
The concern of Mr. Culberson and others is that Wanda’s purchases are part of a move by the Communist Party to expand its global influence to try to ensure that any portrayal of China in Hollywood movies is favorable. 

It has been more than a decade since a Hollywood studio made a major movie critical of China’s authoritarian government.
“These acquisitions, as well as many more cofinancing arrangements, allow Chinese state-controlled companies a significant degree of control over the financing and content of American media that raises serious concerns about how this may be used for propaganda purposes,” Mr. Culberson said in the letter, dated Oct. 6, to John P. Carlin, the assistant attorney general for national security. 

The letter also mentioned recent Hollywood purchases by other Chinese companies.
A spokeswoman for Wanda North America said Friday in an e-mailed statement, “Wanda has and will continue to comply with all applicable U.S. law in connection with its media and entertainment investments in the United States including without limitation making the appropriate filings with the Federal Trade Commission and the Department of Justice.”
The Communist Party ties of Wanda and Mr. Wang were the subject of a New York Times investigation in April 2015. 

The report found that relatives or business associates of four members of the party’s ruling Politburo, including relatives of Xi Jinping, were among the company’s earliest outside investors. 

All appear to have earned spectacular returns.
Shares held in the name of a niece of one Politburo member, Wang Zhaoguo, multiplied in value by more than 1,000, from less than $500,000 at the time they were acquired in 2007 to more than $600 million in early 2015, the Times investigation found.
Wang Jianlin, a longtime Communist Party member, was a delegate to the 2007 congress that chose the next generation of party leaders, including Xi. 

From 2008 to 2013, he was a member of the standing committee of the Chinese People’s Political Consultative Conference, a high-level advisory body to China’s legislature. 

A company owned by an employee of the son-in-law of the body’s chairman at the time, Jia Qinglin, had acquired a stake in Wang’s family holding company only weeks before the 2007 party conclave, The Times found.
By early 2015, those shares were worth more than $250 million, and a stake in Wanda’s Chinese cinema company that was owned by the son-in-law’s investment company was worth more than $130 million.
Late last month, Wanda fired an executive after he was found to have bribed a local official in the northeastern city of Dalian in 2008 and 2009. 

The official helped the company obtain government approval to complete its transition from a state-owned company to a private enterprise, according to a court judgment.