Hollywood has a big case of China on the brain lately. The newly minted chief of the MPAA, former Congressman, Chris Dodd visited China to preach the gospel of doing business with Hollywood, producer Mike Medavoy is forming partnerships in Shanghai, while Legendary Pictures is starting Legendary East, to produce English language pictures in Asia.
I love international trade. Nothing makes peace better than people making money in a healthy way, but is business in China as healthy as it should be, especially for Hollywood.
Let's look at the Pros and Cons of this relationship:
PROS:
1. China is huge market, about a billion people. It is also a market that is very cash flush right now. Why? Look at the products in your house, count the percentage was made in China. Then you know why.
To paraphrase Ned Beatty's character in Network: "The Chinese have taken billions of dollars out of this country, and now they must put it back! It is ebb and flow. Tide and gravity. It is ecological balance."
Because when you have a lot of currency from another country, you are pretty much stuck spending that currency on goods and services from its country of origin. Right now the Chinese are weaning themselves off of buying US government debt with said currency, and are now looking for other ways to put it to work.
2. China's movie business is exploding. Production is expanding, the numbers of theaters are expanding, and the average Chinese citizen is an avid and regular moviegoer. There is also a hunger for product from the west to go alongside their own popular domestic product. (Just look at how much piracy involves bringing western movies into China.)
CONS:
1. While China is a large market, as well as a rich market, it is not a free market. It's still a communist dictatorship. The simple truth is that the majority of the people you do business with in China is either going to be part of the government or a crony/political ally of the government. That's a recipe for trouble.
It also has a funny idea of what trade actually is. They love selling their stuff to the west, but are leery about bringing stuff from the west in, especially something like movies & television. Right now only 20 foreign made movies are allowed to be released in China each year, and even if you do get a shot at the brass ring of a billion plus audience, you're only going to get less than half of the box-office share you'd get in any other market.
And let's not forget how touchy the Chinese government can be. Films can be banned from China for having what the government considers the wrong sociopolitical message, and the Chinese government is not above banning other films by the same company, or threatening the "nationalizing" of foreign owned assets, just to mark their territory. Hence you get things like MGM's Red Dawn remake being rewritten and partially re-shot to change the invading army from Chinese to North Korean. (I believe the ending's been rewritten to have the invasion stall when the North Koreans find their first supermarkets and fast food joints, and stuff themselves too much to fight anymore.)
2. Demographics. China is a booming economy, however, the boom doesn't have the healthy bloom that it should. Vast wealth is pouring into China on a daily basis, but it is tightly concentrated in a very small class of politically connected elites. This is because China is putting the bulk of their eggs in the basket of cheap labor and large scale mass-manufacturing, instead of fostering the combination of highly educated entrepreneurs and skilled tradespeople needed to create new domestic industries and products for export, like they are in neighboring India. Because of this, the wealth coming into China isn't trickling down to the ordinary folks as well as it would in a truly free economy/society.
Then there's the issue of age and sex. The population of China is going to grow old before it grows rich. The decades old "One Child" policy, and cultural preference for boys has created a potential societal powder keg. The population is aging, there are not enough young people to replace them, and the young people they do have are expected to support a senior citizen population that outnumbers them. There's also a escalating shortage of marriageable women in China, and many of those that are marriageable want careers and lives of their own either before, or instead of, settling down to start a family.
So, the combo of state enforced class inequity, limited socioeconomic mobility, and many unsettling population issues shows that while China has great potential as a market, it also has many great risks.
My advice is to tread lightly and watch every step.
I love international trade. Nothing makes peace better than people making money in a healthy way, but is business in China as healthy as it should be, especially for Hollywood.
Let's look at the Pros and Cons of this relationship:
PROS:
1. China is huge market, about a billion people. It is also a market that is very cash flush right now. Why? Look at the products in your house, count the percentage was made in China. Then you know why.To paraphrase Ned Beatty's character in Network: "The Chinese have taken billions of dollars out of this country, and now they must put it back! It is ebb and flow. Tide and gravity. It is ecological balance."
Because when you have a lot of currency from another country, you are pretty much stuck spending that currency on goods and services from its country of origin. Right now the Chinese are weaning themselves off of buying US government debt with said currency, and are now looking for other ways to put it to work.
2. China's movie business is exploding. Production is expanding, the numbers of theaters are expanding, and the average Chinese citizen is an avid and regular moviegoer. There is also a hunger for product from the west to go alongside their own popular domestic product. (Just look at how much piracy involves bringing western movies into China.)
CONS:
1. While China is a large market, as well as a rich market, it is not a free market. It's still a communist dictatorship. The simple truth is that the majority of the people you do business with in China is either going to be part of the government or a crony/political ally of the government. That's a recipe for trouble.
It also has a funny idea of what trade actually is. They love selling their stuff to the west, but are leery about bringing stuff from the west in, especially something like movies & television. Right now only 20 foreign made movies are allowed to be released in China each year, and even if you do get a shot at the brass ring of a billion plus audience, you're only going to get less than half of the box-office share you'd get in any other market.
And let's not forget how touchy the Chinese government can be. Films can be banned from China for having what the government considers the wrong sociopolitical message, and the Chinese government is not above banning other films by the same company, or threatening the "nationalizing" of foreign owned assets, just to mark their territory. Hence you get things like MGM's Red Dawn remake being rewritten and partially re-shot to change the invading army from Chinese to North Korean. (I believe the ending's been rewritten to have the invasion stall when the North Koreans find their first supermarkets and fast food joints, and stuff themselves too much to fight anymore.)
2. Demographics. China is a booming economy, however, the boom doesn't have the healthy bloom that it should. Vast wealth is pouring into China on a daily basis, but it is tightly concentrated in a very small class of politically connected elites. This is because China is putting the bulk of their eggs in the basket of cheap labor and large scale mass-manufacturing, instead of fostering the combination of highly educated entrepreneurs and skilled tradespeople needed to create new domestic industries and products for export, like they are in neighboring India. Because of this, the wealth coming into China isn't trickling down to the ordinary folks as well as it would in a truly free economy/society.
Then there's the issue of age and sex. The population of China is going to grow old before it grows rich. The decades old "One Child" policy, and cultural preference for boys has created a potential societal powder keg. The population is aging, there are not enough young people to replace them, and the young people they do have are expected to support a senior citizen population that outnumbers them. There's also a escalating shortage of marriageable women in China, and many of those that are marriageable want careers and lives of their own either before, or instead of, settling down to start a family.
So, the combo of state enforced class inequity, limited socioeconomic mobility, and many unsettling population issues shows that while China has great potential as a market, it also has many great risks.
My advice is to tread lightly and watch every step.
Dirty McDingus suggests:
ReplyDelete+
Look up in youtube "China Ghost towns" where an Australian news corp highlighted what americano main slime media always fail to notice. china is truly the only full on paper tiger in the world. To prop up their GDP; they've been building whole Cities! Where no-one can afford to live in.
China's prosperity is one built on a weak foundation called a Communist Dictatorship. Just like here in Detroit or any corrupt ghetto city in the USA. All economic activity and wealth is controlled by a connected crony civil govt. That is a recipe for disaster compounded with the demographic problem we are looking at a population that will go stagnant like Japan and end up getting a LOST DECADE in 20 years.
ReplyDeleteThe USSR fell apart because of that same crony politics, It was the RED MAFIA in the end that brought down the regime combined with the Cold War Arms race.