In October, Wang Jianlin, chairman of the Dalian Wanda Group, came to Hollywood to hail the deepening cooperation between the U.S. and China. Cheryl Boone Isaacs, president of the Motion Picture Academy, praised him for building “an unprecedented bridge” between the two cultures, and announced the naming of the Wanda Gallery at the Academy’s new museum.
Just two months later, much has changed. President-elect Donald Trump has threatened sweeping tariffs on Chinese goods, which portends a more fraught relationship with the Middle Kingdom. On Capitol Hill, Democrats and Republicans are raising alarms about Chinese acquisitions of U.S. entertainment companies. And in China, there are rumblings that the flow of Chinese capital abroad could be curtailed.
“The potential exists for a very different relationship,” says Scott Harold, a China expert at the Rand Corp.
Scott Sommer, a producer and consultant who works extensively in China, agrees. “It’s more fragile now than it was a year ago,” he says. “And that was more fragile than the year before that. A lot of things were said on the campaign trail that are adding fuel to the fire.”
No one can say for sure what path Trump will pursue. On the one hand, he has been remarkably consistent on trade policy since the late 1980s, when he called for a 20% tariff on goods made in Japan and West Germany. Trade policy was at the center of his brief flirtation with a Reform Party candidacy in 1999, and he called for a 25% tariff on Chinese goods in 2011. He upped it to 45% during his presidential run this year. At this point, no one should be surprised if he follows through.
|Andrea De Santis for Variety|
On the other hand, there are practical and legal limits. Trump could use the threat of tariffs to attempt to wring concessions from China on issues like state subsidies and piracy. If forced to make good on the threat, he could impose tariffs on certain industries. Under federal law, though, an across-the-board tariff could last no longer than 150 days, nor exceed 15%.
Greg Frazier, who worked on China policy at the Motion Picture Assn. of America, says such a move would be calamitous. “It’s a disaster for us, it’s a disaster for China, it’s a disaster for the world economy,” Frazier says. “It’s unwise all around. I just hope cooler heads will prevail.”
The entertainment industry is counting on increasing access to the Chinese market to fuel global box office growth. Under a 2012 agreement, China allows 34 foreign films — almost all of them U.S.-produced — to open in China each year. The agreement expires in February, and studios would like to see the quota increased, with more favorable financial terms.
“This is one of the first big bilateral trade agreements that the new administration is going to have to deal with,” Frazier says. “It’s a huge thing for the U.S. industry. It’s politically sensitive.”
MPAA chairman Chris Dodd is optimistic that a new agreement will be reached to further open the Chinese market. China is rapidly building new theaters and is destined to become the world’s biggest film market within a few years; it will need U.S. films to continue that growth.
“I’m concerned that we could end up in a very acrimonious relationship with China in the coming months,” Dodd says. “But I also think there is a possibility that we will end up on a very positive path in the area we’re involved in. Not because China wants to do Donald Trump a favor, or the U.S. a favor, but because they see it as their self-interest.”
Despite differences in campaign rhetoric, Democrats and Republicans have tended to handle the China relationship in similar ways. For decades, both parties have operated on the presumption that deeper engagement would grow the Chinese middle class, fostering civil society and leading to political reforms. But while the middle class has materialized, political reforms have not. Indeed, China has become more repressive toward free expression, not less, jailing journalists and cracking down on internet news portals.
That has undermined the consensus that has long shaped America’s China policy, Harold says. “There is a growing concern among a number of observers that we have taken a pathway that has empowered a major strategic rival or adversary,” he says. “This country that does not share our values is not transforming in the way we thought.”
The Trans-Pacific Partnership — which Trump has pledged to scrap — was seen by its supporters as a way to contain China’s rise. The election of Trump may represent, if not a turning point, then at least an inflection point toward an even more adversarial policy.
“I just don’t know,” says Rob Cain, who advises entertainment companies on China ventures. “Trump is such a wild card. I wouldn’t be surprised to see a crackdown on U.S. content if the [Communist] Party felt aggrieved in some way…. We’ve got a president-elect who’s morally and emotionally unhinged and just spouts whatever occurs to him in the moment, consequences be damned. I think it’s a really dangerous situation for Hollywood.”
|“We’ve got a president-elect who’s morally and emotionally unhinged and just spouts whatever occurs to him at the moment, consequences be damned. I think it’s a really dangerous situation for Hollywood.”|
Trump has not focused on Hollywood’s efforts in China. His “landing team” to work on trade policy includes Nucor Steel CEO Dan DiMicco and trade attorney Robert Lighthizer, who are more interested in pursuing issues around steel and other Chinese manufacturing imports. But Trump’s pick for Treasury Secretary, Steven Mnuchin, has an extensive background as a film financier.
“For Hollywood, that’s comparatively better news than if it had been someone who had less experience in the industry,” says Aynne Kokas, a professor at the University of Virginia and the author of “Hollywood Made in China,” due out in February.
Kokas says the pick shows that Trump may take a more pragmatic approach to the China relationship than he did during the campaign. She notes that despite his harsh rhetoric, Trump used to sell clothing that was made in China.
“I think some of it is very disingenuous,” she says. “It’s an easy rallying cry to talk about a trade war. At the same time, it’s not like Donald Trump hasn’t been raising money from the Bank of China and manufacturing goods there and importing steel.”
Stephen Saltzman, an entertainment attorney at Loeb & Loeb who works with Chinese investors, says most of the people he talks to are “cautiously optimistic.”
“I think [Trump] is capable of engendering some kind of retaliation,” he says. “But would he actually do it? I don’t think so. I would hope he and his advisers are going to be smarter than that.”
Trump has pledged, however, to apply greater scrutiny to Chinese investments in the U.S. His transition team has indicated that he is interested in “reciprocity”: Why should the U.S. allow China to buy American companies when U.S. investors are barred from buying similar companies in China?
Sen. Chuck Schumer, the Democratic leader who has been looking for ways to work with the Trump administration, recently raised concerns about the Wanda Group’s spree of billion-dollar acquisitions — including AMC Theaters, Dick Clark Productions, and Legendary Entertainment — saying they may “reflect the strategic goals of China’s government.” U.S. companies, he wrote, “should be able to compete with Chinese companies on a level playing field at home and abroad.”
Paired with rumors that China may impose new restrictions on outbound investment, it’s possible that the era of massive Chinese acquisitions in Hollywood may soon be coming to a close.
“That is real, and that is concerning,” Sommer says. “It’s something I think about every day.”
Ted Johnson contributed to this story.