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China's clampdown on foreign investments raises questions for Hollywood as Wanda's Dick Clark deal stalls

The Chinese government’s recent clampdown on money leaving the country has broad repercussions for industries like mining and real estate.

Now the crackdown may have reached Hollywood’s doorstep. Dalian Wanda Group’s agreement to buy Dick Clark Productions, producer of the Golden Globe Awards, for $1 billion appears to have hit a snag nearly four months after the acquisition was announced

Wanda, run by billionaire Wang Jianlin, is having trouble getting its capital out of China to pay for the production company, according to people familiar with the situation who were not authorized to comment.

The delay underscores the increasing hurdles that ambitious companies face as the government tries to curb the flow of money pouring out of China. Representatives for Wanda and Dick Clark Productions declined to comment. 

The Wrap reported Monday that the deal had fallen through. However, sources familiar with the transaction said Tuesday that it faced delays but was not over.

A government curtailment of foreign investment could have far-reaching consequences in Hollywood, where major studios have become increasingly reliant on financing from China, which is now the world’s second-largest film market.  Studios and producers including Paramount Pictures, Sony Pictures and Steven Spielberg’s Amblin Partners have all recently signed film financing deals with Chinese business giants, including Wanda.

Wanda’s pursuit of Dick Clark, which also produces the Academy of Country Music Awards and “Dick Clark’s New Year’s Rockin’ Eve With Ryan Seacrest,” is not the first China-Hollywood deal to be affected by the government’s policy. Chinese copper company Anhui Xinke New Materials was set to buy “The Hurt Locker” producer Voltage Pictures for $350 million, only to have the deal recently scrapped under government scrutiny.

Other industries have been hit too. Barrick Gold Corp. has reportedly run into problems in its efforts to sell its stake in an Australian mine to a Chinese company, for example. 

Chinese officials, fearful last year of a plummeting yuan, erected roadblocks to prevent capital from leaving the world’s second-largest economy. The government probed overseas acquisitions and created measures to curb what authorities call “irrational” outbound investment, making it more difficult for firms to receive permission to transfer yuan and close deals.

The policy is aimed at companies that are making investments far outside their expertise, entertainment lawyer Lindsay Conner said. That doesn’t apply to Wanda, which already owns theater chain AMC Theatres and film producer Legendary Entertainment, Conner noted.

“Wanda is certainly at the top of the list of companies that know what they’re doing,” said Conner, co-chair of the entertainment and media practice at Manatt Phelps & Phillips.

The regulations have particular resonance in the U.S., which received the greatest share of China’s outbound foreign direct investment last year at $45.6 billion, according to the Rhodium Group, an economic research firm. The group, in a December report, noted that Beijing was singling out sectors that received the biggest chunk of Chinese capital, such as entertainment. The report warned that the policy changes could impact pending transactions. 

China's outward investment in January declined nearly 36 % from a year earlier, according to China’s Ministry of Commerce. 

American studio executives also have been anxious about whether China will allow more movies into the country. The government currently permits 34 foreign films into China annually under a revenue-sharing agreement. That agreement is up for renegotiation this year.

Many people in Hollywood have expressed concern that protectionist rhetoric from President Trump could delay any increase in the quota and chill investment from Chinese companies. Wanda in particular has been the target of calls by multiple U.S. lawmakers to heavily scrutinize Chinese investment in U.S. industries, especially entertainment.

Meyers is a special correspondent.  

ryan.faughnder@latimes.com

@rfaughnder

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