|China funding Hollywood...what's the deal?|
The quest by Chinese firms to acquire global technology is about to get $5 billion boost.
Chinese venture-capital firm GSR Ventures is raising a $5 billion fund to buy overseas assets, according to people familiar with the situation. The fund, which is expected to be announced Monday, will target deals to acquire companies in technology, Internet, and biotechnology industries for which the Chinese market is key to growth prospects, they said.
GSR Ventures, a firm set up by Chinese tech entrepreneurs in 2004, raised its profile outside the country in March when it joined U.S. venture-capital firm Oak Investment Partners in the purchase of 80% of Philips NV’s lighting components and automotive-lighting operations in a $2.8 billion deal.
GSR Ventures’ latest fundraising comes as Chinese firms, encouraged by policy makers in Beijing, are pushing abroad to snap up technologies that China imports from abroad. Many of these, such as semiconductors and advanced automotive technology, are markets in which China is the world’s largest consumer of the end products, for example mobile phones and cars.From this perspective, acquisitions of Western concerns would make sense since China is becoming the largest consumer market for electronics. That said, those so-called security concerns always rear their ugly head:
In the most ambitious of those efforts so far, China’s state-owned Tsinghua Unigroup Ltd. made a $23 billion approach to chip maker Micron Technology Inc. this month. Tsinghua Unigroup, an arm of the country’s top science university, faces hurdles in bringing Micron to the negotiating table given the potential scrutiny such a deal would bring from the U.S. government.If tech is the stronghold of Northern California (NorCal), entertainment is that of Southern California (SoCal). As it so happens, the Chinese are also keen on acquiring the expertise of those in Hollywood by helping raise money for various productions:
The boxing drama “Southpaw” released over the weekend has a seemingly unlikely partner in its corner: Chinese conglomerate Dalian Wanda Corp. Wanda financed the approximately $30 million production budget for the Jake Gyllenhaal movie. It was produced and is being released by Weinstein Co., which is paying for about $35 million of marketing expenses. The two companies will split any profits.As with Chinese buying foreign tech, the goal in financing films is partly to acquire knowledge--both hard and tacit--useful for industrial purposes.
“They were on the set and involved in production, postproduction, marketing, everything,” said Weinstein President David Glasser. “They wanted to learn how we do what we do.” In exchange, Weinstein is hoping Wanda will help the movie gain a favorable distribution arrangement in China, which the government grants to just 34 foreign films a year. “Southpaw” represents one of several ways Chinese companies lately have been trying to tap Hollywood moviemaking know-how.
Four former heads of major studios and studio divisions have in the past year launched or taken jobs atop startups backed by Chinese investors. Together, the four new companies have commitments of more than $660 million from China.Right...so what are the Chinese interested in again?
They are launching amid a wave of Chinese investment in the entertainment business, technology and other U.S. industries. The Chinese companies aren't only looking to make money, people involved in the moves say, but to gain expertise in areas where they are currently not global leaders. “China is the fastest-growing movie marketplace in the world and the source of a tremendous amount of capital,” said Sheri Jeffrey, a partner at law firm Hogan Lovells who focuses on entertainment finance. “That’s why these are such perfect partnerships.”
China gets its own benefit from the deals: the advice of some of Hollywood’s most experienced hands at a time when its government is pushing entertainment as a source of “soft power.” Though it has become the world’s second-largest movie market, China has yet to produce a globally popular movie of the type regularly churned out by Hollywood. Allying with former studio chiefs is seen as a tool to change that.Can China acquire foreign expertise by buying US tech and bankrolling US entertainment? They can surely try, but there are residual concerns over American protectionism over purchasing tech masquerading as "national security." Moreover, can US film production techniques be directly applied to "Made in China" storylines? Somehow, I doubt it.