Shanghai Film Corporation's 3.5 billion yuan investment in Paramount is suspected to be suspended, policy restrictions are tightened, and Chinese capital is blocked from sailing abroad

in addition to policy restrictions, many foreign companies are also looking for "pickup knight-errant" when introducing Chinese capital. After the foreign film industry has entered a period of weakness or decline in terms of production, special effects, cinemas and box office, the risk of Chinese going out to sea is also increasing.

original title: 3.5 billion of the film injection of Paramount has been blocked, and Chinese investors are facing two major risks of "policy restrictions and sunset traps". According to a report by Variety, an authoritative US film and television magazine, the $1 billion deal between Paramount and Shanghai Film Group and Huahua Pictures has recently encountered major obstacles. Several recent mergers and acquisitions and deals in Hollywood have stalled because of restrictions on capital outflows by the Chinese government, according to people familiar with the matter.

in addition to policy restrictions, many foreign companies are also looking for "pickup knight-errant" when introducing Chinese capital. After the foreign film industry has entered a period of weakness or decline in terms of production, special effects, cinemas and box office, the risk of Chinese going out to sea is also increasing.

on March 8, Shanghai Film shares fell 2.37%; on March 9, Shanghai Film shares fell another 2.95% to 35.92 yuan per share.

< strong > Capital flight + Trump New deal, China's policy restrictions are tightening < / strong >

in January 2017, Shanghai Film Group and Huahua Pictures announced that they would invest in all Paramount Pictures films in the next three years, even those that are no longer released in China. The deal was negotiated in November 2016 and did not surface until January 2017.

according to Variety, Shanghai Film and Hua Hua Media will inject 1 billion US dollars into Paramount Pictures of the United States. Under the terms of the agreement, Shanghai Film and Hua Hua will provide at least 25% of the funding for each film production in Paramount over the next three years, and have the right to choose to extend the partnership.

but China's policy of restricting capital outflows has prevented the deal from going smoothly on schedule. In particular, as a state-owned enterprise, it is very difficult for Shanghai Film Group to transfer its first phase share of US $1 billion from China to the United States.

on the other hand, Huahua Pictures, a partner of Shanghai Film Group, has been less affected because it is privately held and has sufficient funds stored overseas, so it is not so binding by foreign exchange controls. An industry source close to Huahua Pictures said that capital outflow control is indeed an obstacle, but Huahua Pictures will work hard to push forward the deal as scheduled. Huahua Pictures said in an email that the deal had made good progress.

in 2016, the RMB exchange rate fell 6.5% against the US dollar, prompting a large number of Chinese capital outflows, and China's overseas investment exceeded domestic investment for the first time. In the second half of the year, the Chinese government was forced to impose administrative restrictions. In addition, China's foreign exchange share has declined for 15 months in a row. The balance of China's foreign exchange reserves fell to $2.998204 trillion by the end of January 2017, the lowest level in nearly six years since February 2011 and the seventh consecutive month of decline, according to central bank data.

the decline of both foreign exchange reserves and foreign exchange share is usually seen as the embodiment of capital outflow pressure. The serious outflow of Chinese capital has attracted great attention from the government.

Shanghai Film Group successfully went public in August 2016, raising 136 million US dollars. However, because of its state-owned assets background, it can only abide by the rules and cannot play on the sidelines of the policy. Even if its deal with Paramount is risk-free and does not hurt its own core business.

in view of the obstacles encountered at present, the possible solution is for Birch Pictures, as the transaction representative, to pay the Chinese side US $150 million on schedule, and then deliver the funds to Birch Pictures domestically. Or, Shanghai Film will deliver its share of the transaction as a loan to Birch Pictures to ensure that the deal goes ahead smoothly.

at present, the willingness to cooperate between the three companies is very strong, and they all hope to overcome the obstacles. Hua Hua Pictures has invested in several Paramount films, including Star Trek 3: beyond the Stars, Transformers 4: rebirth of Extinction, and extreme Agent 3: ultimate return, which grossed $162 million at the Chinese box office. At the same time, Shanghai Film Group and Huahua Pictures also plan to open a joint venture in Paramount.

it is worth noting that this is not the first overseas entertainment industry transaction affected by policy restrictions. Earlier, Dalian Wanda's $1 billion merger of Dick Clark Productions (DCP), a television production company, was also affected.

Wang Jianlin, chairman of Wanda Group, tried his best to complete the agreement reached last November, according to people familiar with the matter. During the DCP auction, no competitor was able to come up with the $1 billion offered by Wanda.

however, the deal is still in trouble. Some in the industry attribute it to the fact that China is taking steps to stop capital flight amid political tensions in the new Trump administration in the US.

< strong > State-owned enterprises have joined the army to capture Hollywood, but it may be "Sunset Trap" < / strong >

. It is said that 2017 is the year of Hollywood blockbusters, but this is not only reflected in the list of more than 30 Hollywood blockbusters to be released in China, but also in the capital level.

Paramount itself has a lot of cooperation with domestic film and television companies, and Wanda and Ali Pictures have had a lot of overlap with it. Previously, Huahua Media and Paramount have worked together to make several films, and Shanghai Film Group has also invested in the production of "Chivalrous Detective Jack: never look back."

also in January this year, Chinese Film announced that it planned to invest $15 million in a project partnership with Universal Studios for the film Fast and Furious 8. Provide cinema distribution of the film in the region.

one is that China Film has invested 100 million yuan in a film, and the other is a capital injection of 7 billion yuan in the past three years. It can be seen that the next cooperation between the mainland and Hollywood will be more and more in-depth, and the capital investment will be more and more huge.

but what is different this time is that both China Film and Shanghai Film are from the background of state-owned enterprises, and the amount of money involved is huge, and the significance behind this is even more prominent.

in the near future, following the internationalization of a large number of Chinese private enterprises, Chinese state-owned enterprises continue to go out to sea, and Chinese capital begins to hold the film market and channels to make Hollywood princes, which is undoubtedly a particularly exciting and good thing. But the risks behind the Great Leap forward are likely to be greater.

as Hollywood A-level / A +-level mass production is opened to China, Chinese films will grow and progress rapidly. However, Hollywood is willing to open its arms to Chinese capital because Hollywood blockbusters have entered a bottleneck in recent years, so they have to rely on the upstart of the Chinese film industry and the big brother of state-owned enterprises to share the risks.

in the past five years, the North American box office has been growing slowly or even negatively. The annual box office in North America totaled $10.836 billion in 2015; $10.92 billion in 2013; 10.35 billion in 2014, down 5% from 2013. The North American film market experienced a rather sluggish year, with none of the TOP10 films exceeding $400m; in 2012, the total box office in North America finally exceeded $11 billion to $11.122 billion; in 2016, the North American box office grossed 11.375 billion, still growing slowly.

although there are still many Hollywood blockbusters released in China this year, they also have a strong ability to attract money. However, most of them are still supported by the series of sequels, which seems to be prosperous, but it actually exposes that Hollywood has entered the bottleneck of innovation, and in the long run, it is bound to decline.

Star Wars 7, Jurassic World and Avengers 2 took up seven seats in the top 10 Hollywood films at the North American box office in 2015. The other three films, brain Secret Service, Martian and Cinderella, are not original either.

A total of 36 sequels (including prequels and derivatives) were released in the United States in 2016, compared with less than 30 sequels in the previous two years.

according to Mtime, with the launch of big investments and sequels, there was a lot of box office news on the other side of the Pacific in the middle of last year: big investments such as "Independence Day 2" and "Hunt God" were poor at the box office, and low-and medium-cost sequels such as "supermodel 2" and "neighbor Wars 2" were not ideal. Foss's "X-Men: apocalypse" didn't do as well as "reverse the Future." Paramount Pictures has been deceived by the failures of films such as Ninja Turtles 2 and Ben Hur, with profits falling by more than 1500% last year. Fortune magazine called the 2016 summer season "the summer of poison at the box office."

in its article Hollywood is Dead, Tiger sniff says that DreamWorks was sold to Comcast for $3.8 billion last year, and Paramount's recent valuation is around $10 billion, almost the same as Viacom's offer for it more than 20 years ago. Between 2007 and 2011, the total profits of the nation's five largest studios (20th Century Fox, Warner Bros., Paramount Universal Pictures and Disney) fell by 40%; and, profits from films now account for less than 10% of the total profits of these companies or their parent companies. To make matters worse, that number is expected to fall to about 5% by 2020, and only Disney may be spared.

in addition to falling into weakness at the box office, several major Hollywood studios have begun a round of high-level upheaval since 2016:

in April 2016, DreamWorks Animation was acquired by NBC Universal, and its founder Geoffrey Katzenberg withdrew from the front line.

in June 2016, Foss Pictures announced that Jim Gianopoulos, the CEO of 17 years, would leave office in 2017.

in September 2016, Rob Moore, vice chairman of Paramount Pictures, was forcibly dismissed.

in September 2016, Rob Moore, vice chairman of Paramount Pictures, was forcibly dismissed.

in January 2017, Sony Pictures CEO Michael Linton resigned; Thomas Tourre, founder and CEO of legendary Pictures, announced his resignation;

in February 2017, foreign media reported that Paramount Pictures CEO Brad Gray would be dismissed, and Universal Pictures President Donna Langley's contract would expire.

imagine, if it were not for leftovers that "foreigners" could not handle, how could they be willing to sell to a foreign country? If China's tuhao has been pouring money into overseas sunset industries, it is indeed worth worrying about.

< strong > instead of "going out", it is better to "bring in" and let Hollywood work for Chinese films < / strong >

at the beginning of 2016, legendary Pictures, acquired by Wanda 23 billion, has suffered huge losses for two consecutive years. In 2015, legendary Pictures had total operating revenue of 3.02 billion yuan, net profit of-3.63 billion, total debt of 9.35 billion; total revenue of 2.63 billion in 2014, net profit of-2.24 billion, and total debt of about 9 billion. This year, legendary Pictures "Warcraft" and "the Great Wall" fell short of expectations.

" Warcraft "and" the Great Wall "production cost and box office statistics

just like TCL's acquisition of Thomson in France, BenQ's acquisition of Siemens mobile phone business in Germany, and Lenovo's acquisition of Motorola in the United States, these are all foreign sunset industries bought by China. At first, it seemed like a good thing to make a bargain, but in fact, it bought the burden in the "discount promotion" activity.

at present, China's film industry is indeed on the rise after barbaric growth, but it is on the verge of sunset abroad, and even Hollywood is gradually declining.

if Chinese capital wants to go out, it needs to be on guard against these "sunset traps". Most of the reasons why foreign companies are willing to be acquired is that foreign film special effects companies, cinemas, production companies and so on have been or are about to be sunset industries.

in 2012, Pentium Horse and an Indian company jointly acquired Digital Domain, a well-known American special effects company, for $30.2 million. However, low profits in the special effects industry have saddled digital groups with huge debt, and profitability remains a big problem after the acquisition. It is worth mentioning that according to the acquisition rules, layoffs are not allowed in the acquisition company, and the employees of the acquisition company are very expensive and have to support them. in the end, Pentium, the pony, has to sell the special effects company.

the frequent operation of Chinese enterprises in the overseas film and television market is conducive to the further expansion of China's international business territory, but the frequent capital operation will also be accompanied by the corresponding risk of investment and mergers and acquisitions. On the one hand, due to the current domestic economic development expectations are not good, a large number of capital outflows, from the perspective of financial security, the state will also strengthen the control of foreign exchange capital. On the other hand, the uncertainty of the market, especially cross-border mergers and acquisitions, the operation of capital needs to be handled more carefully.

therefore, instead of "going out", it is better to "bring in". Instead of stepping into the "sunset trap" abroad, it is better to introduce high-quality foreign teams into China and let Hollywood teams work for Chinese films.

because China's film industry is still on the rise. In particular, state-owned enterprises such as Shanghai Film and China Film should not, like Confucius Institutes, shoulder the so-called national mission to cover foreign land, but should follow the needs of the market and bring high-quality foreign film teams into China.

for example, Renee Harlin, the director of Escape of the Jedi, has set up a production company in China. Renee Harlin has been living and working in Beijing for the last two years.

in June 2016, the Chinese station of the Hollywood Reporter reported that Lenny. The production company Harlin set up in China, called Midnight Sun Pictures, is funded by Beijing-based Garbo Culture Group, which will have priority for Midnight Sun films under the agreement. The company will create Chinese local films, as well as Chinese and foreign co-production films, which will mainly produce genre films and action blockbusters.

there is also the Moon Zhaoming of the Ancient Sword and Strange Tam, which is scheduled for release in 2018, which is also directed by Renee Harlin, co-produced by Ali Pictures and Chengxiang Film and Television, starring Wang Leehom and Song Qian.

compared with Chinese capital attacking cities and territories overseas, how to improve the quality of domestic films is a real national event.

this year's Spring Festival blockbuster "Kung Fu Yoga" and "Journey to the West" both chose foreign special effects teams. Among them, behind "Journey to the West" are two South Korean special effects companies, mofac&alfred and Dexter, used by Xu Ke, while the special effects of "Kung Fu Yoga" are also completed by South Korean company Dexter. China has both money and market. It is fully capable of attracting leading filmmakers from all over the world, such as Hollywood, Japan and South Korea, to work for Chinese films.

at present, in the face of the impact of Hollywood blockbusters, most domestic films can only rely on policy protection to survive. However, the film protection system is not good for domestic films, because it makes domestic films less enterprising and never grow up. Just like the monopoly of the automobile industry, after so many years, it is still an imbecile giant baby.

therefore, instead of letting domestic capital go out, it is better to use it to introduce high-quality foreign teams, let foreign advanced film industry enter China, hire more Chinese employees, and let Chinese filmmakers rapidly improve themselves in the process of globalization. While solving the lack of competitiveness of domestic films, by creating a perfect grading system, the whole Chinese film market will truly move towards globalization and enter the contention of a hundred schools of thought with rich themes, which is the best environment for domestic films.

I hope that all our Chinese filmmakers have the confidence and ability to confront foreign blockbusters head-on!

Edit: nancy