The visit of the next Chinese President Xi Jinping to the US coincides with a landmark deal between Hollywood’s DreamWorks Animation and two state-owned Chinese media groups. It is the clearest possible signal that under Xi Jinping China plans to be a major investor and partner with Western enterprises. And Xi Jinping is said to be a fan of old American films.
This contrasts with previous decades where Chinese surpluses were used to buy American bonds. Here in Australia, mainland Chinese are the main buyers of inner-city apartments in Sydney and Melbourne but Australians should watch the China-Hollywood deal, because I believe a version will be applied to the Australian tourism industry and could extend to food. There are some remarkable parallels.
Like Australian tourism and sections of rural industry, Hollywood is in trouble. Cinema box office takings are at best flat and the DVD sales which had been booming are now in decline. Although film studios win if they produce a blockbuster, the American film industry has not understood how to adapt to the new online world.
And so to Hollywood executives, China must look like the US of 30 years ago. New cinemas are being built at an amazing rate – some say three screens a day are opening. China is set to be the biggest cinema market in the world. The Chinese want to watch American films but there are strict curbs on the market.
Under the planned deal, DreamWorks Animation and Shanghai Media Group, plus China Media Capital, will construct a film-making studio in Shanghai. In the longer term it will also boost the amount of Chinese money being invested in Hollywood.
DreamWorks Animation made the Shrek and Kung Fu Panda films while government-owned Shanghai Media Group is China’s second-largest broadcaster and China Media Capital is a fund backed by SMG, China Development Bank and China Broadband Capital, an IT fund.
This deal will be followed by others and in time China's enormous market plus American knowledge will mean that China, along with India, will be the major force in the global film industry. It’s a repeat of what is happening in mobile phones, computers and cars.
And add to that list global tourism. In this game, Australia has the chance to be a major player. Like the US domestic film market, domestic Australian tourism is in the doldrums as Australians use the high dollar to travel abroad. Watch the Chinese move into this depressed industry in the next five to 10 years and expand it dramatically. They will do the same thing in food, where Australian farms are being squeezed by the supermarkets. China in time will break the supermarket squeeze but that’s well into the future.
Meanwhile, prepare for a bigger Chinese influence in the films we watch.