How is China extending its influence across the world?

Mohammed Al Mubarak, Jing Shuiqing and Michael Garin

As the incoming US administration promises to abolish trade agreements and severing trade ties with the rest of the world, China is spreading its economic and cultural tentacles across the planet, reaching as far as Africa, Latin America and the Middle East. And while major Chinese media companies are focusing their investments in Hollywood and US entities in order to tap into their lucrative profits, the Chinese government is forging ties with other parts of the world, seemingly to gain cultural influence in addition to economic ones.

Last month, the Chinese and United Arab Emirates (UAE) governments signed a $300 million international fund deal, through their respective production organizations, The China Intercontinental Communication Center (CICC) and Abu Dhabi Image Nation respectively. CICC is the first and the biggest production organization in China, and since it was founded in 1995, it has formed a rapport with 70 organizations from 30 countries. Image Nation is one of the largest film funds in the world, established in 2009 with $1 billion to invest in Hollywood and international projects.

Image Nation’s CEO, Michael Garin, a former Hollywood executive, insists that the deal is strictly financial and not cultural. “We will invest in productions from all over the world regardless of its origin, whether it’s Hollywood, Chinese or European, as long as we see a potential profit,” he says. “Instead of locking the money in the bank, the Chinese government chose to invest it in film, so they came to us because we have a good record in film production investment.”

Indeed, Image Nation has invested in successful blockbusters such as “The Help” (2011) and “The Best Exotic Marigold Hotel” (2011), but is monetary profit what truly motivated the Chinese government to make this investment? Before jumping to any conclusions, let’s look at other facts.

The CICC-Image Nation deal was born from another, much bigger deal that was signed between their respective countries in December 2015, during a visit of the crown prince of Abu Dhabi, Sheikh Mohammed Bin Zayed Al Nahyan. The prince agreed with China’s president, Xi Jinping, to establish a $10 billion joint investment fund, which focuses on direct equity investments in China and the U.A.E, and targets strategic sectors such as conventional and renewable energy, infrastructure, technology and advanced manufacturing.

The deal with UAE is just one element of a much bigger Chinese program, “One Belt, One Road,” which was unveiled by Mr. Xi in 2013. The program aims to foster new trade routes and revive old historical ones, such as the ancient Silk Road, between Asia and Europe via a network of railways, roads, ports and other infrastructure. Mr. Xi has also launched the $100 billion Asian Infrastructure Investment Bank and a $40 billion Silk Road Fund to help finance the program.

The U.A.E was a stop on The Silk Road, which was established during the Hans Dynasty (207 BCE-220 CE), to connect China to Central Asia, The Middle East, Africa and Europe. Only a few decades ago, the country was made of a collection of desert villages, but now it is considered one of world’s most important commercial hubs, with cities, such as Dubai, hosting the world’s tallest building, Burj Khalifa, and the most-known international brands. And in addition to being a major market for Chinese products in the Middle East, it’s also a home to some 200,000 Chinese people. And most importantly, UAE’s Image Nation owns a TV network, Quest Arabia, that airs in 24 Arab countries and reaches 250 million people. So no wonder that China has chosen it as an anchor to extend its financial and cultural influence in that part of the world.

On January 28th, 2017, the beginning of the Chinese new year, Quest Arabia will begin airing a nightly program called, An Eye on China, which was produced by CICC, to educate Arab audiences about China, its culture, history and its people. The following year, an exchange program will take effect, whereby Arab professionals will be sent to China and live and work there, and Chinese professionals will do the same in the UAE. “It’s all part of the one belt, one Road program,” Garin says.

The UAE officials boast about their special cultural and historical ties with China, but spending the last 10 days in Dubai, attending the Dubai International Film Festival (DIFF), I witnessed a dominance of Western culture and little Chinese influence, which is confined to few shops and restaurants. Although made-in-China products can be found on the shelves of every shop, the Western brands are the ones flashing on the ubiquitous billboards.

Matters don’t look any better for China on the culture front. DIFF, which opened and wrapped its activities with Hollywood movies, “Ms Sloane,” and “Star Wars: Rogue One” respectively, had only one Chinese entry. More Hollywood movies were screened during the festival, and its stars, such as Andie Macdowell, Luke Hemsworth and Samuel L Jackson graced the red carpet and offered workshops and Q/A’s. Needless to say, the cinema multiplexes in the local giant malls are monopolized by American movies. Nonetheless, Garin still thinks that China is better at reaching out to the world than Hollywood.

“Hollywood is very egocentric,” he exclaims. “They don’t have a track record with others. So far, they are doing a good job taking other people’s money. They are still creating content that first works in the US, and then they think of others. Reaching out to the world is a new experience to them. They need content that works for everyone first. That’s a different skill set that we and Chinese have.”

CICC and Image Nation claim to distinguish themselves from Hollywood by investing in content that genuinely works in both the US and China without resorting to the cynical attempts of inserting an arbitrary Chinese character in a movie in order to meet the quota obligations (only 34 foreign movies get a release in China)  and secure a release in China.

But that is exactly what other Chinese companies are trying to do. Dalian Wanda echoed this sentiment in his recent statements saying that he wanted to create content from a perspective other than western.  He is exerting his influence by acquiring Hollywood entities, such as Legendary pictures and signing collaboration deals with the likes of Sony Pictures. His company’s first collaboration with Hollywood, Zhang Yimou’s “The Great Wall,” is told from the Chinese perspective with the international audience in mind. It has swept the Chinese box office and is expected to do well in the rest of the world’s markets.

While Garin admits that his company would participate in funding such projects, remarking: “Our partnership is with a governmental body that finances companies like Wanda, Ali Baba and Tencent, so naturally we will be able to participate in those investments,”  he still insists that The CICC-Image Nation investment model is more solid than the private Chinese companies. “When Wanda decides to buy a company or Tencent invests in a film slate in a studio, it’s a little like going to the casino and bidding on black. CICC doesn’t do that. Instead of putting money on black, they want to work with us because they don’t want to risk money in Hollywood.”

But it’s also possible that the CICC, which belongs to the Chinese government, is refraining from a direct investment in Hollywood in order avoid a clash with the US authorities, which has declared its suspicion of the Chinese-companies’ motives behind their recent acquisition of American media companies, describing it as an attempt to spread Chinese influence in the US.

“This is the epitome of ignorance and arrogance,” Garin exclaims. “What influence does Superman have on culture and how would Batman be different if made by a Chinese. Hollywood is about making movies to entertain people, and that wouldn’t change, whether it’s run by Chinese or others.”

Hollywood’s executives agree with Garin’s argument and fear that Donald Trump’s hostility towards China would jeopardize their attempt to increase access to the Chinese market to fuel global box office growth. Under a 2012 agreement with the US, 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. Currently, the studios receive only 25% of their films’ gross at the Chinese box office compared to 50% from other countries.

Hollywood has suffered another blow in Mexico, its 4th largest market, in the wake of Trump’s election, which has caused an 18% plunge in the value of the peso. The devaluation severely eroded the dollar-denominated earnings of the Hollywood titles, forcing US studios to rethink their strategies for south of the border.

As the box office plateau in the US and Trump is erecting financial walls around it, Hollywood studios are looking beyond the borders for future profits. And as media markets become more sophisticated, studios opening shops outside the US, such as Mexico, Brazil and Russia, where they are investing in local content, aimed for local consumption. Will that put Hollywood on a collision course with China’s cultural ambitions?

Hollywood is a business, and unlike Washington, it sees China as a business partner rather than a political and financial menace, and has no cultural ambitions. It will work with anyone who has the money to keep it running, whether it was the Chinese government or Chinese private companies. So it will be just another tool in China’s arsenal to extend its cultural reach across the world.  But while the private Chinese companies, such as Wanda and Tencent, will continue to seek out Hollywood content directly in order to feed their giant networks of theaters and digital platforms, their government will do so indirectly through deals with like-minded governments, such as the UAE.