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China’s Real Estate Developers Roll Dice on Film Studios

Supply of soundstages outstrips demand amid ongoing construction boom

“Build it and they will come,” seemed to be real estate developers’ motto during China’s great commercial and residential property boom, which crunched to a halt about two years ago.

Speculative developments changed skylines around the country and led to huge profits for some companies, including Chinese multiplex powerhouse Dalian Wanda. But the gambler philosophy also led to the creation of ghost towns, unwanted new building in the wrong places.

Now there is a new construction boom, this time focused on movie studios and theme parks, and picking winners is just as tricky. “China today is like the early days of Hollywood,” says Michael McDermott, who heads Chinese location services company Gung-Ho Films. “Some (studios) will work out, but others will stand idle for 10 or 20 years before being demolished.”

According to some reports, China already has close to 1,000 facilities for shooting movies, most of them idle or underused. Shooting stages are dotted around the country, a legacy of Maoist theories that abhorred centering any industry in one city, and of state-controlled studio groups as concerned with providing local employment as creating entertainment.

However two monster filming facilities have emerged: Hengdian World Studios and China Film Group’s Huairou complex. Hengdian, opened 18 years ago, claims to be the biggest studio in the world. It includes full scale replicas of the Forbidden City and the Summer Palace.

“Local films can use Hengdian free of charge. The studio earns its money from tourism, hotels, food and entry tickets. It had 12 million visitors last year,” says Fred Wang, head of Salon Films.

A veteran of the production services business in Asia, he now has a joint venture with Hengdian.

Huairou, 30 miles out of Beijing, opened in 2008 and replaced the old Beijing Film Studio that once housed “The Last Emperor” and “Farewell My Concubine.” Huairou’s 16 new stages last year welcomed “Gone With the Bullets” and are currently home to Legendary East’s “The Great Wall.”

“Some are hoping that more Chinese films shoot in studios,” says Chu Chen On, of production services company October Pictures. But the economics of the studios business in China differs markedly from those elsewhere in several ways. Some stages will be sustained not by feature production, but by the tens of thousands of hours of local television dramas produced each year.

Wanda insists that its Qingdao studios and backlot will be stand-alone operations, but the company’s wider project, Wanda Oriental Movie Metropolis, is a $10 billion mixed-use development. About 250 acres have been reclaimed and apartment blocks have already been built.

Even bigger are the film-related theme park projects, some of which call for film production facilities in later phases.

Disney and local partners are building the $5.4 billion Shanghai Disney Resort, set to open in early 2016. Under construction nearby is the Dream Center, a $2.7 billion entertainment complex backed by DreamWorks Animation, China Media Capital and the Lan Kwai Fong group.

Still other developments include the Movie Town park on tropical Hainan Island, Wanda recently opened an indoor theme park in Wuhan and Universal’s planned $3.3 billion park is set to open outside Beijing in 2019.

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