Slower Chinese Economic Growth May Pose Challenges for Hollywood

AP

China's ruling Communist Party has tried to ease fears about slowing growth, saying that the transition from double-digit percentage annual growth was the "new normal" of better quality growth.

The pace of growth in China's economy fell to 7 percent in the first quarter of this year, the slowest since 2009, adding to fears that the world's second-biggest movie market may be in line for a difficult slowdown.

Monthly retail sales, industrial output and fixed asset investment data released with the GDP figures all fell short of analysts' expectations. Growth in fixed-asset investment (FAI), a key economic driver in China, was the slowest since 2000, while industrial output grew at its weakest rate since the global financial crisis in 2008.

While the broader economy is slowing, the media business, which is profiting from China's emerging middle class, has been relatively immune to the slowdown so far. Chinese film and TV companies, such as Huayi Brothers and Enlight, have been reporting better-than-expected earnings in the past few weeks.

Part of the reason for this can be seen in the data for disposable income, which China's growing middle class uses to buy movie tickets and presented good news for Hollywood.

The average per capita disposable income of Chinese households rose 9.4 percent year on year to $980, while inflation was low, at 1.2 percent in the first quarter.

Last year, Chinese box office was $4.84 billion, up 36 percent, and by the end of 2014 China had 23,600 screens. It is expected to overtake the U.S. as the world's biggest cinema market at some point in the next few years.

And there has been a flurry of deals between Hollywood and China — Huayi Bros. is linking up with Robert Simonds' STX Entertainment, while Lionsgate signed a $375 million film financing deal with Hunan TV last week.

The fate of the movie business is closely linked to that of the real estate sector, as the dramatic rise in the number of movie screens is linked to the explosion of shopping malls in China's cities.

Real estate investment rose an annual 8.5 percent in the first quarter, the weakest rate since 2009.

"The slowdown of GDP in the first quarter is as expected. The Chinese economy is generally holding steady in the first quarter because employment, consumer prices and market expectations are basically stable, despite a slowdown in economic growth," said Sheng Laiyun of the National Bureau of Statistics.

Stimulus money injected into the economy saw a large number of investors putting their money into media stocks. Earlier this week, the internet giant Tencent topped $200 billion in market capitalization for the first time, overtaking U.S. tech companies such as Amazon, IBM and Oracle in size.

However, Tencent's market value plunged by $11 billion after billionaire chairman Ma Huateng cut his stake in the operator of Asia’s most popular message services to 9.65 percent from 9.86 percent.

comments powered by Disqus