China's Wanda Faces Renewed Scrutiny
December 01 2016 - 1:00AM
Dow Jones News
A top Senate Democrat is calling for increased scrutiny of
China's ambitions in Hollywood and other sectors, lending a
critical new voice to a cause championed by President-elect Donald
Trump.
In a letter sent Wednesday, incoming Senate Minority Leader
Chuck Schumer said the takeovers of U.S. companies by China's
Dalian Wanda Group Co. and others warrant further scrutiny to
determine whether they are being orchestrated by Chinese government
interests—possibly leaving U.S. companies to compete on an uneven
playing field. The move increases the likelihood of a
re-examination of how the U.S. allows the nation to invest in
American companies.
"I am concerned that these acquisitions reflect the strategic
goals of China's government," he told Treasury Secretary Jack Lew
and U.S. Trade Representative Michael Froman in the letter, a copy
of which was seen by The Wall Street Journal.
Wanda and its U.S.-based holdings have completed several
entertainment acquisitions this year, and the conglomerate has a
pending deal to buy Dick Clark Productions for $1 billion.
Mr. Trump, who has indicated his administration will also take a
closer look at such deals, was copied on the letter.
If the president-elect follows through on promises to scrutinize
such deals more closely, Mr. Schumer's letter could signal a shift
for U.S. policy toward China. For decades, some lawmakers on both
sides of the aisle have been unhappy with the White House, both
under President George W. Bush and President Barack Obama, whom
they saw as timid about confronting China, the biggest holder of
U.S. debt.
Now, a senior Democratic lawmaker and the incoming Republican
U.S. president could be on the same side of the issue, potentially
shaking up the landscape. Congressional backlash to foreign
investments have lately focused on flashy Hollywood deals, but the
outcry could have sweeping ramifications across other sectors of
the economy, and produce a chilling effect for overseas
investors.
"You can be certain that the new Congress in 2017 will work on
legislation to further expand CFIUS oversight authority," Mr.
Schumer wrote, referring to the Treasury Department's Committee on
Foreign Investment in the U.S., which examines foreign deals seen
as potential threats to national security. CFIUS reviews have
traditionally concerned sectors like aerospace.
Wanda has previously responded to similar calls for scrutiny by
saying the company "has and will continue to comply with all
applicable U.S. law in connection with its media and entertainment
investments in the United States, including without limitation
making the appropriate filings with the Federal Trade Commission
and the Department of Justice." The company didn't immediately
respond to a request for comment on Mr. Schumer's letter.
Mr. Schumer's stance aligns the Democrat on one issue with the
president-elect. A document circulated by Mr. Trump's transition
team stated that the administration would ask CFIUS to review
foreign transactions that couldn't be replicated by a U.S. entity.
That could cover Chinese investment far beyond Hollywood, since
Chinese companies can become majority owners of U.S. assets but
China doesn't allow U.S. companies to do the same.
Mr. Schumer said the ability for Chinese companies to take a
majority stake in U.S. assets, often backed by state officials and
China's sovereign-wealth funds, is unfair considering stateside
companies are handicapped from doing similar deals in China. U.S.
companies hoping to do business in China usually have to form a
joint venture that often includes the sharing of intellectual
property—an arrangement that Mr. Schumer called a "pay to play
system."
"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," he
wrote. Mr. Schumer said Chinese acquisitions across multiple
sectors—information technology, transportation, manufacturing and
agriculture, among others—are often supported by Chinese government
subsidies designed to encourage global expansion.
Like several politicians before him, Mr. Schumer set his sights
on Wanda, whose chairman, Wang Jianlin, is China's richest man,
according to Forbes. In a speech in Los Angeles in October, Mr.
Wang said he isn't motivated by government agendas. "I am a
businessman," he said.
Wanda's acquisitions in Hollywood have raised concerns among
politicians and some entertainment executives that they are "soft
power" plays designed to spread Chinese culture and messaging
through American media. The country is the second-largest movie
market in the world behind North America, but it imposes a quota of
34 movies that can be imported from all countries to its theaters
each year.
In the past several years, Wanda has become the world's largest
movie-theater operator through its $2.6 billion acquisition of AMC
Entertainment Holdings Inc., expanded into film production with the
$3.5 billion purchase of Legendary Entertainment and its Dick Clark
deal signaled an expansion into television. Wanda has become known
in Hollywood for an insatiable interest in acquiring more assets,
and Mr. Wang has publicly indicated his hopes to own one of
Hollywood's major studios.
Congressional scrutiny of China's media acquisitions has been
ramping up since September, when 16 members of the House of
Representatives asked the Government Accountability Office to
investigate whether CFIUS's authority has kept up with the
expanding scope of foreign investment in the U.S.
Brody Mullins contributed to this article.
Write to Erich Schwartzel at erich.schwartzel@wsj.com and
Siobhan Hughes at siobhan.hughes@wsj.com
(END) Dow Jones Newswires
December 01, 2016 00:45 ET (05:45 GMT)
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