Incoming Senate Minority Leader Chuck Schumer is calling for greater scrutiny of China's aggressive dealmaking in Hollywood, lending Democratic support to an issue raised by President-elect Donald Trump and his allies.
In a letter sent Wednesday - and reviewed by the Wall Street Journal early Thursday - Schumer said Chinese acquisitions of U.S. media companies should be examined to determine whether they are being orchestrated by the Chinese government. The letter reportedly highlighted Dalian Wanda Group by name.
Headed by China's richest man, Wanda has been on a Hollywood buying blitz throughout 2016. In January, the conglomerate paid a reported $3.5 billion to acquire Legendary Entertainment, the Burbank-Calif.-based studio behind Pacific Rim, Warcraft and the upcoming The Great Wall, starring Matt Damon. Wanda, which began as a real estate development company in China, already owns the AMC Entertainment theater chain in the U.S. and other chains around the world. In addition to inking a major partnership with Sony Pictures, Wang told THR in November that he planned to invest in all six of the big U.S. studios. Wanda also has a pending $1 billion deal to buy Dick Clark Productions, owner of the Golden Globes and other glitzy Hollywood awards shows.
"I am concerned that these acquisitions reflect the strategic goals of China's government," Schumer said in his letter, which was addressed to Treasury Secretary Jack Lew, U.S. trade representative Michael Froman and President-elect Trump. Other politicians have suggested before that Chinese companies' overseas media buys could be a "soft power" grab of sorts, since the Chinese government has placed cultural influence abroad among its top policy priorities.
"You can be certain that the new Congress in 2017 will work on legislation to further expand CFIUS oversight authority," Schumer went on. The Treasury Department's Committee on Foreign Investment in the U.S., known as CFIUS, reviews foreign acquisitions of U.S. companies whose business is of national security interest. Traditionally, areas such as national infrastructure or aerospace have been the subject of CFIUS reviews, but a group of U.S. congressmen have argued for the organization's purview to be expanded to include media and entertainment assets.
THR has reached out to Wanda for comment.
During the recent presidential campaign, Trump often said he intended to take a harder line on Chinese trade barriers and currency manipulation (although the latter is a mostly outdated claim). With Schumer offering bipartisan support for greater scrutiny, a change to the regulatory landscape looks increasingly likely.
"While China's government has aggressively pursued policies that encourage strategic acquisition in the U.S., U.S. companies continue to face steep barriers to market access in China," Schumer reportedly added.
According to the WSJ, a document circulated by Trump's transition team said that his administration would ask CFIUS to review any foreign transactions that couldn't be replicated by a U.S. entity. Such terms would presumably entail all Chinese buyouts of U.S. media entities, given that China forbids U.S. companies from taking full control of Chinese media and entertainment interests, even though the U.S. allows China to do so.
U.S. companies that want to access China's growing markets, home to the world's second-biggest movie box office, are required to establish joint ventures with local operators, the terms of which typically entail handing over operational control and intellectual property. The Walt Disney Co., Warner Bros and DreamWorks Animation each have a Chinese joint venture in order to operate theme parks or engage in film production in the country. Schumer characterized China's requirements as an unfair "pay to play system."