Recently, the Dalian Wanda Group has been taking on water and is doing all that it can to just stay afloat, announcing earlier this month that it would be selling off some $9.3 billion in tourism assets, finally waving the white flag in its bitter war against Disney for theme park supremacy in the Middle Kingdom.
However, it now seems that the company’s Hollywood dreams may be crushed as well. According to the Wall Street Journal, Wanda is actually selling off $13 billion in assets to Sunac China, a Chinese property developer, and included in that is one of the company’s most sensationalized investments: the Qingdao Movie Metropolis.
Back in 2013, Wang Jianlin, Wanda’s founder and owner, was marketing Qingdao as the Chinese alternative to Hollywood, planning a massive $7.3 billion complex which would include top-notch film studios, as well as an outdoor theme park and hotels, in “the single biggest investment in the history of the movie and TV industry.” To unveil this intended capital of his company’s movie-making empire, Wang invited in stars such as Leonardo DiCaprio and Nicole Kidman to take part in the red carpet festivities.
However, the highly-publicized complex had a rocky start and appears headed for an even rockier future. Last year, Wang was forced to offer Hollywood’s biggest names subsidies as high as 40% in an attempt to lure business to his barren film-city. Various plans to increase interest in the project, such as hosting a film festival, never panned out. Failure after failure has critics pointing fingers at poor management and overly-confident investments, leaving Wang with no choice in the end but to sell away his silver screen dreams.
Over the years, Wanda’s founder has made a number of bold claims (like the time he thought he could trounce Disney) and has attempted some even bolder deals, but recently, he’s had a run of uncharacteristic bad luck. His main amusement park was a flop, he was unable to tie the knot with any major Hollywood studio and his golden ticket, Hollywood’s Legendary Pictures, is steeped in debt and is without a CEO.
To make matters worse, Wanda, along with other massive corporations, appears to have royally pissed off the Chinese government. Just a decade ago, Chinese businesses were being encouraged to expand on the global market. But then the 2008 recession hit, and China’s debt ballooned from 160% of its GDP to 260% in 2016. President Xi Jinping is now backpedaling and is forcing companies to do the same.
Analysts are still searching for more answers to explain what financial and political forces brought Wanda’s owner to make such a colossal business decision. Wang has suggested that his deal with Sunac was part of an effort to cooperate with Beijing’s request for companies to reduce leverage.
“Wanda sold what should be sold and maintained what should be saved,” he simply told Caixin.
Meanwhile, John Burke, head of the entertainment group at law firm Akin Gump Strauss Hauer & Feld, told the Los Angeles Times that Wanda’s willingness to bend so easily to Beijing’s will is a bit puzzling.
“Clearly this [Qingdao sale] indicates Wang is lowering his expectations and goals for the entertainment business,” he said. “People were looking at Wanda like they were the real deal. There’s a lot of tire kickers over here from China, but Wang clearly seemed to be a guy who could write checks and do the deal. Now people are scratching their heads.”
However, Wang told Caixin that this massive deal with Sunac was part of an effort to “respond to the state’s call,” adding that he will now be looking to invest more heavily into local industries.
Either Wang was suddenly overwhelmed with a patriotic sense of duty to his country or Chinese authorities somehow managed to make some pretty convincing arguments. We don’t know yet what will be the consequences of Wang’s decision, but a fate similar to Wanda’s seems likely to befall other high-flying business moguls in the future if they stray from the Party line.
By Emma Abrams
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