China approves Disney Shanghai park

Central government approval ends limbo, welcomes Obama

Updated Nov. 4 at 2:24 pm Beijing time

BEIJING--China's central government finally gave The Walt Disney Co. the green light to build a new theme park in Shanghai's Pudong district, after the project spent years in limbo, the company said late Tuesday.

"China is one of the most dynamic, exciting and important countries in the world, and this approval marks a very significant milestone for The Walt Disney Company in mainland China," Robert Iger, president and CEO, said in a statement.

The Shanghai park will join Hong Kong Disneyland to become Disney's second in China and third in Asia, counting Tokyo Disneyland. The move is seen in part as a nod to U.S. President Barack Obama, who, with a large U.S. trade delegation, makes his first visit to China in mid-November.

Lack of Beijing's central government approval had been a major stumbling block for much of the last decade as Disney sought to build a park in Shanghai -- China's largest and wealthiest city, where nearly 17 million residents have the country's highest per capita nominal GDP, $3,264 in 2008, as compared with $46,714 in the U.S.

Despite years of effort and a gradual opening amid rapid growth in China's economy, companies like Disney -- which employs 600 people in China -- Time Warner and News Corp have little to show for their efforts in this country, where the government strongly controls the activities of foreign media companies trying to operate in its nascent marketplace.

The Shanghai Disney park was first dreamt up in 1990 by former Chinese Premier Zhu Rongji, then the city's mayor, after he visited Disneyland in California. Nearly 20 years later, a Shanghai park could bring thousands of jobs to the city in a time of recession.

Despite strong efforts by Disney, the park and its massive investment -- reported to be about $3.6 billion -- did not come with any concession on the television front, where Disney is limited in China to roughly 12 hours each week of "Mickey Mouse Clubhouse" programming on local stations.

Following Beijing's approval of Disney's Project Application Report, the city of Shanghai and Disney's Parks and Resorts division, led by Jay Rasulo, must still work out more details on the park, said a Disney spokeswoman in Hong Kong.

"Essentially the PAR approval represents one milestone in the process," she said. "The next stage enables us to proceed with detailed discussions with the Shanghai government to produce a final deal." No further details were made available officially.

However, according to sources familiar with the negotiations who spoke on condition of anonymity, the park could take up to six years to complete, occupy as much as 1,700 acres of Pudong and be about 40% owned by Disney, The New York Times reported.

The remainder of the shares of the Shanghai park -- which could eventually rival the size of Disney World in Florida -- would be owned by a group of Chinese companies hand-picked by the government, The Times said.

The Shanghai park, set to be situated between the Pudong Airport and downtown Shanghai, will feature a "Magic-Kingdom" style, in keeping with its cousins in Asia, the U.S. and France, a spokesperson in Hong Kong said. It will also have Chinese characteristics as a "part of the localization process that is a part of the deal," she said.

Earlier rumors that Disney had secured approval for the Shanghai park boosted shares of property developers that have holdings in Pudong. The city had decided on a site in Shanghai's Pudong New Area for the planned project but was still in discussions to determine who the local business partners might be, a government source told Reuters earlier this week.

The new Shanghai park, which would be Disney's sixth, is close to a number of other major cities linked by affordable trains or within easy driving distance, including Nanjing, Suzhou and Hangzhou.

Analysts said that Shanghai's distance from Hong Kong will separate them and not draw down the Hong Kong park's attendance too dramatically.

"Visitors from Guangdong and southern China will still find Hong Kong more convenient while Shanghai will attract visitors from northern and eastern China," said Paul Tang, chief economist of Bank of East Asia.

A spokesman for Hong Kong Disneyland said that attendance at that park, the smallest of the company's theme parks, had been more than 17 million people from the time it opened in Sept. 2005 through the end of May this year.  That's an average of about 415,000 visitors per month over 41 months.

"From our point of view the Hong Kong and Shanghai parks are not competitors, they're complementary," a Disney spokeswoman said. "We really believe that the greater China market is big enough to support multiple parks."

-- Alfred Cang and Sue Zeidler of Reuters contributed to this report.
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