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There was no ignoring the geopolitical cloud hanging over the China-Hollywood relationship as the fifth annual U.S.-China Film & Television Industry Expo convened in downtown Los Angeles on Wednesday.
During the event’s first panel discussion — titled “The Details of Dealmaking” — industry executives from both sides of the Pacific were sanguine about the powerful forces working against new business between the world’s two largest film markets, be it President Trump’s escalating trade war or Beijing’s harsh crackdown on outbound investment into the entertainment sector.
“You can’t deny that when you have a trade war going on that it stifles relationships,” said Stephen Saltzman, a lawyer at Paul Hastings who has represented Chinese state-owned entities in dealings with Hollywood.
“We’ve been trying to navigate through a lot of regulatory changes,” added Bennett Pozil, executive vp at East West Bank, a specialist in cross-border financing. “And now we have a trade war, which doesn’t make sense to anyone who has read a little history — it’s just not good for business,” Pozil said.
Saltzman also noted that Beijing’s efforts to block foreign investment into entertainment have had the desired effect of “changing the ability to move money in and out of the country — which obviously both impedes deal flow and impedes the performance of past deals.”
“You also can’t deny that the American side gets a little impatient when the moneys there are owed aren’t coming through as quickly as originally anticipated,” he added.
With Beijing’s block on yuan flowing into Hollywood holding firm, U.S. talent and production outfits are now more often venturing East than Chinese execs are heading to Los Angeles, Pozil said, citing Project X, a Jackie Chan and John Cena action vehicle, as an example.
Although classified as a fully Chinese production, the film co-stars Cena, is directed by Need for Speed filmmaker Scott Waugh and counts Americans among its producer ranks and in many other below-the-line positions. The film is told mostly in English, but the filmmakers are exclusively targeting the Chinese marketplace, with no deal yet in place for international distribution.
“Through Jackie Chan and his big box-office draw in China, they would rather focus on the international part of the movie afterwards and keep it simple,” Pozil explained. “Right now, keeping it simple is probably a good strategy — just focus on the essentials,” he added.
Jing Cao, an entertainment attorney at O’Melveny & Myers, said she doesn’t expect China’s current distance from dealmaking in Hollywood to become anything like a permanent state of affairs. “China has seen investment in the U.S. as a way to access skills and resources, and to learn how to make better movies,” she said. “That need is not going away just because the Chinese government is cracking down on outbound investment.”
Cao added: “What I’ve heard from my Chinese clients is not, ‘OK, let’s just forget about all of these U.S. investments.’ Instead, they’re saying, ‘Let’s wait and see when we can try to make these investments again.'”
Still, Cao expects the Chinese to return to the table with more nuanced demands. “Increasingly, Chinese companies are less interested in playing the role of a pure financier,” she said. “When they consider an investment in either a slate or an individual film, they are looking to secure China distribution rights, so they have something tangible to their market where they can add value.”
Todd Makurath, COO of AGBO Films, the China-financed startup studio founded by Joe and Anthony Russo, agreed that business relations between Los Angeles and Beijing are evolving, not ending.
“Over the last 10 years, you had one very fast-growing market with quite a bit of capital and a huge consumption demand for product and new stories,” Makurath explained. “And then you had another market that is always looking for new capital and growth opportunities to exploit.” The dealmaking frenzy of the past several years was simply “a function of so much capital and demand, and people trying to find good product,” Makurath said.
“What we’re seeing right now is a shakeout of that irrational exuberance that came with all of this new opportunity of these two markets trying to work together,” he added. “I do still foresee that there’s going to be much tighter integration and continued growth of collaboration — it’s just going to happen in a much more measured and careful way.”
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