Did you even know that money from China was flowing into Hollywood? In case you didn’t, a lot of stuff makes sense now, right? Maybe now we will have less actors that are for communist causes. Wouldn’t that be nice.
Beijing begins monitoring “irrational” investments in entertainment companies (even while Alibaba pledges $7.2 billion) as one deal falls apart and all eyes focus on Trump.
Chinese companies poured record amounts of capital into Hollywood in 2016 — a trend eagerly embraced by the U.S. film industry. Among the deals: Dalian Wanda Group acquired Legendary Entertainment for $3.5 billion and Dick Clark Productions for $1 billion; Alibaba made a major investment in Steven Spielberg’s Amblin Entertainment; and Beijing-based Perfect World Pictures put $500 million into 50 films from Universal.
But tighter regulatory scrutiny and rising protectionism in the U.S. and China now have the industry questioning whether the deal flow could dry up in 2017. Already, there have been casualties.
Indie film player Voltage Entertainment, producer of The Hurt Locker and Dallas Buyers Club, surprised many in November when plans came to light for a provincial Chinese manufacturing firm to acquire the Los Angeles-based studio for $350 million. But within weeks, the firm, Anhui Xinke New Materials, revealed it was aborting the deal after failing to meet additional documentation requests from local regulators.
The agreement might have squeaked through if it had come a few months earlier. In early December, Beijing announced it was monitoring a pattern of “irrational” overseas investments in several sectors, particularly film, real estate and sports. In an effort to stem capital flight, which was seen as contributing to a devaluation of China’s currency, regulators signaled that stricter oversight is on the way. According to a leaked draft of the new rules, Chinese officials said they would scrutinize offshore purchases of more than $1 billion if they were outside the investor’s “core business” area. Insiders say deals well below that threshold already are being reviewed as well.