China’s Rising Threat to the U.S. Movie Industry

Op-ed column originally published at Politico.com

By Richard Berman

Dick Clark Productions—the producer of “New Year’s Rockin’ Eve” and other American classics—is on the verge of a major sale.

The buyer? Dalian Wanda, a Chinese firm closely aligned to China’s Communist Party.

The same company is intent on “build[ing] a real movie empire” by consolidating U.S. film studios and movie theater chains under one parent company. In 2012, the company bought AMC Entertainment—the second-largest movie theater chain in the country for about $2.6 billion. It then purchased Legendary Entertainment—the producer of “The Dark Knight Trilogy”—for an even heftier $3.5 billion in January of this year. Chinese-controlled AMC now plans to buy Carmike Cinemas for $1.2 billion, forming the country’s largest chain with 8,380 screens in more than 600 theaters by the end of the year.

For American moviegoers, the peril lies in the unseen. Would a war movie called South China Sea ever play in one of Wanda’s theaters? What about an action flick with a Chinese villain?

When you control the movie experience, you can subtly influence public opinion. And the Chinese government—Wanda’s staunch supporter—has been transparent about that goal. The Communist Party has banned or currently bans thousands of books deemed controversial. It heavily censors the Internet, while Facebook and Twitter remain prohibited in China—one of the reasons Freedom House ranked it a more restrictive society than Iran and Saudi Arabia.

The film industry is perhaps the most restricted sector. China currently allows only 34 foreign movies into the country, all of which are subject to censoring by a state agency called the State Administration of Press, Publication, Radio, Film, and Television. No foreign production can penetrate China’s lucrative market of 1.3 billion people—a boon for Hollywood filmmakers—without receiving SAPPRFT’s stamp of approval. The agency’s mission is to portray Chinese culture favorably by censoring images that “undermine ethnic unity and social stability.”

This leaves U.S. moviemakers in a precarious position. Due to SAPPRFT restrictions, all American movie scripts are vulnerable to change based on the Communist Party’s wishes. For example, the 2006 release of “Mission: Impossible III”—partially shot in Shanghai—retroactively excluded a scene of the city featuring underwear hanging from a clothesline because SAPPRFT claimed it portrayed China as “a developing country.”

In some cases, U.S. filmmakers preempt SAPPRFT’s approval process through self-censorship. Prior to completion, Pixels—the 2015 action-comedy flick—initially depicted aliens blasting a hole in the Great Wall, but the scene was removed entirely from the final version of the movie. Producers “spared the Great Wall because they were anxious to get the movie approved for release in China.” Similarly, the 2012 remake of “Red Dawn” originally featured Chinese soldiers invading an American town, yet producers changed the invaders into North Koreans pre-release without even receiving a formal complaint from Beijing.

This takes us back to Dalian Wanda, whose ambitions appear to transcend buttered popcorn and soda sales. The company’s founder and chairman, Wang Jianlin, is a former Communist deputy who served in the People’s Liberation Army for almost two decades. He claims to “stay close to the [Chinese] government,” steering at least $1.1 billion in state subsidies from the Communist Party—which has vowed to “build its capacity in international communication”—to Wanda, Beijing’s foot soldier on the ground. He has sold company stakes to relatives of some of China’s most powerful politicians and business executives, including the business partner of former Prime Minister Wen Jiabao’s daughter and relatives of two members of the Politburo—the Communist Party’s principal policymaking committee.

By gaining a foothold in the U.S. movie industry, Wanda assumes greater control of the production and distribution process, including the capacity to censor movies pre- and post-release. The company could even block a “controversial” movie—that is, one unapproved by the Communist Party—from being shown at its movie theaters. As Wang proudly admits, “AMC’s boss is Chinese, so more Chinese films should be in their theaters where possible.”

What can be done to counteract Chinese censorship?

Fortunately, Congress is not without options. Legislators can broaden the scope of the Committee on Foreign Investment in the United States — an interagency committee that reviews foreign acquisitions of U.S. companies—to include communications assets in the movie industry. As it stands, CFIUS only scrutinizes foreign dealmaking with a direct impact on “hard power” strategic sectors from a national security standpoint (e.g. a wind farm near a military base). The committee currently focuses its efforts on “critical infrastructure” and “critical technologies,” narrowly defined as “systems or assets” integral to “homeland security.”

The CFIUS charter should be updated to cover “soft power” assets inextricably linked to U.S. public opinion, especially when state-funded companies like Dalian Wanda are involved. Congress can do so by updating the Exon-Florio Amendment—the 1988 law that outlines the covered transactions under the committee’s charter—to better assess foreign forays into the movie industry. One option is to introduce a baseline test granting CFIUS the power to deny mergers and acquisitions if public opinion formation by an entity connected to a hostile state actor is a concern.

Legislators should also review and reform the longstanding Foreign Agents Registration Act, which requires disclosures when foreign entities seek to lobby or influence public opinion through propaganda and other means. Expanding the disclosure process to include Wanda’s shopping list, for example, would provide American moviegoers a better understanding of subtle communist propagandizing in their local theater.

They deserve nothing less.