Here comes Chinese FDI in a very public way
Monday, May 21, 2012 at 8:58AM This NYT story today really jumped out at me, and the Chinese just bought, in a signature Foreign Direct Investment move, the second-biggest movie chain in the US:
The Wanda Group, a Chinese conglomerate with extensive interests in the entertainment business, has agreed to acquire AMC Entertainment, North America’s second-largest movie theater owner, in a deal that is valued at $2.6 billion, including roughly $2 billion in assumed debt, the companies said Sunday.
David Gray/Reuters
Gerardo I. Lopez, AMC’s chief executive, left, exchanged documents with Zhang Lin, vice president of the Wanda Group, during a ceremony in Beijing on Monday.
The acquisition creates the world’s largest theater group, the companies said. It also represents a significant expansion of Chinese influence in the American film industry. The industry has been looking to China for a vast new reservoir of ticket buyers for Hollywood movies, while joining Chinese investors to produce films like the planned “Iron Man 3” and teaming up to build studio facilities and a new Disney theme park in China.
The usual motives apply: Chinese firm looking for know-how in an industry that's booming across China but isn't being as monetized as it could be - by Western standards. For the US company, a crucial sub-plot emerges a few paras down the story:
In addition to the $2.6 billion value assigned to AMC’s debt and equity in the deal, Wanda is expected to invest $500 million for what the companies called “strategic and operating initiatives.” Mr. Wang said that the money would generally be used for renovation and other needs, but that specifics were up to Mr. Lopez and his team. Mr. Lopez said there was no plan in place for the money. But, he said, it might be used to retire debt, acquire new theaters or fix up old ones.
To me, this is a very positive development, and it's one we're going to read about countless times over the next decade. And yes, it will look and feel like Japanese money "buying up everything!" across America in the late 1980s/early 1990s.
But, of course, America has "suffered" these invading waves of FDI throughout our long history as a multinational economic union. Chinese money will be just as good and useful as those of the other countries that preceeded it, and the further intertwinning of our economies will mitigate the craziness out of the Beltway crowd as they pine for a "near peer" competitor to justify the dropping floor of the defense budget.
You know, the Chinese were going to be the featured villain in the remake of "Red Dawn," but then Hollywood realized they'd be shutting themselves out of the Chinese box office, so they subbed in the North Koreans, which - of course - makes the film a complete and utter fantasy. But it just goes to show you what all this financial connectivity leads too - cooler heads prevailing everywhere save among those fiercely dedicated fear-mongers in DC.
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Reader Comments (3)
San Diego has been referred to as the "Gibraltar of the Pacific." Nuclear sub base, 3 aircraft carriers, Naval base, Naval Air Station, Marine Air Base, 1st Marine Division, All ready to protect our interests in the "Pacific." Now we find the Chinese have established a beachhead in Hollywood?
That's what happens when you replace John Wayne with Johnny Depp.
I look forward to the "Blockbuster" about the "Long March" starring Tom Cruise as Mao.
Interesting contrast with the latest CNBC article. Article talks about defaults and requested halts of incoming raw materials.
Are Chinese companie moving up the economic food chain, literally within the span of a lifetime? How fast can an economy mature? Theoretical limits on this? Is it a function of growth rate?
I can see it now: Quotations from Mao's Little Red Book joining the pre-movie ads and public service announcements :-)