The case of Wanda in China

The global movie industry has become a field of confrontation in which nations compete, not only for a question of economic growth, but also for pride and influence. But how can states intervene in a sector dominated by private actors?

The international power dynamics underlying the rise of the Chinese movie industry is a good case to explore this issue. Recently, China has become increasingly influential in the global movie industry. This is both due to the rapid growth of its domestic market, and to its ambitious investments.

As one of the most dynamic market on the planet, China has attracted the interests of the dominant players of the global movie industry in Hollywood. The growth of the film market within China has been nearly five times as fast as the growth rate of the Chinese economy. Box office revenues increased from US$435 millions in 2004 to US$3.6 billion in 2013, becoming the second market for movie production. Between 2008 and 2012, the number of screens tripled from 4,100 to 13,100 and movies produced in China increased from only 82 in 1992 to 745 in 2012.

A number of Hollywood studios like Sony Pictures and Columbia Pictures have tried to enter the Chinese market and have had to face two main obstacles: censorship and quotas. The Chinese state, in fact, has mobilised both instruments to protect the movie industry in the country. In 1994, Time Warner invested in multiplex cinemas in China, as the country was initiating a process of opening to global trade. Based on a partnership with the public organisation China Film, it was able to build many movie theatres in the country. But, while the initial partnership left 70% of ownership to Time Warner, the Chinese authorities eventually decided to deprive it from the majority of the shares and attributed 51% of the joint venture to the Chinese partner. This shows a first dimension of the way in which state actors can constrain the actions of powerful private actors in the movie industry. Thanks to their capacity to regulate, they can, in fact, exercise their power to protect the domestic market.

On the other hand, China’s global influence in the film industry has been pushed forward by one of China’s largest conglomerate, named Wanda. The group was founded in 1988 as a residential real estate company, and became a “Fortune Global 500” company with a value of over 35 billion dollars. Now it holds shares in a variety of businesses, including real estate development, entertainment, finance, sport and high tech industries. The cultural industries section represents about a third of the total value of Wanda. Its amazing purchasing power has enabled it to gain control over key players of the global movie industry.

In the 2010s, the Group made the acquisition of several large foreign companies that operated movie theatres and became the largest owner of cinemas worldwide with more than 13,000 screens. Wanda purchased the U.S.-based AMC Entertainment Holdings Inc. for US 2.6 billion dollars in 2012, as well as the U.K.-based Odeon & UCI Cinemas Group for US 1.13 billion dollars. Wanda has also been active on the production side. In 2016, the Group bought Legendary Entertainment for an amount of US 3.5 billion dollars and announced a partnership with Sony Pictures Entertainment, to invest in some of its productions with an explicit willingness to emphasize Chinese culture within the films. As Wanda’s CEO, Wang Jianlin, argued, this move was intended to make Hollywood movie’s production more suited to penetrate the Chinese market: “China is destined to become the largest film market, and if you want to profit from this market, you will have to understand the Chinese audience”.

However, Wanda has not only been investing in Hollywood studios, it has also strived to boost the movie production within China. In September 2013, Wang Jianlin, announced the launch of the Qingdao Movie Metropolis, which opened in 2018. When fully completed, it is set to host 52 high-tech studios in addition to movie theatres, and a theme park. This mega-project of over US 8 billion dollars covers an area of 166 hectares and has the ambition to enable Chinese films to reach a global audience.

All of these actions show how crucial a private actor can be in cultural diplomacy. But what kind of relations exist between what happens at the business level and at that of cultural power politics? The CEO of Wanda argued that he was pursuing his strategy in his country’s interest saying it represented “an opportunity to implement a national policy in order to promote cultural power”. Besides, foreign actors can also be inclined to perceive such ambitions as a strategic threat. With its series of acquisitions of Hollywood assets, the Group sparked controversies in the US, where 16 congressmen asked for a review of Chinese investments in the media industry.

Nevertheless, while it is tempting to interpret these different moves as a sign that China is strategically taking over the movie industry to promote its culture, corporate interests and state interests do not always overlap. In recent years, the Chinese government intervened directly to limit the global expansion of Wanda in order to prevent capitals and currencies from leaving the country, by introducing measures to limit loans by state-owned banks. This led Wanda to focus more on the domestic market and to sell some of its foreign assets.

This brings us back to the discussion we had last week about soft power. Despite the many interpretations of the relationship between the expansion of creative industries and soft power, there is little evidence that private firms push their foreign interests in the name of their country’s influence.

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Cultural Diplomacy

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