By Robert Cain for China Film Biz

February 9, 2012

The Year of the Dragon so far looks to be the year China starts investing some serious coin in Hollywood. During the past week several purportedly major Chinese investment funds have burst onto the scene with intriguing announcements about the riches they intend to spread around the cash-starved American film business.

Could this be 2005 all over again? Back then Wall Street’s hedge funds fell all over themselves to fund slates and individual film projects, convinced they were smarter than the ‘rubes’ in Hollywood who didn’t know what they were selling. As a veteran banker friend put it to me then, “The Wall Street guys think they’ve discovered beachfront property under the noses of a bunch of west coast hicks and it’s there for the taking.”

Of course it didn’t take long to see who the real rubes were. After investing hundreds of millions of dollars with such companies as Relativity Media and Capitol Film, Wall Street got a costly lesson in what it’s like to deal with Hollywood’s dark side. If the hedge fund managers did indeed find a sunny beach anywhere, they got badly burned. Even though there were other, more honorable recipients of film funding, enough damage was inflicted that few of the Wall Street financiers who were new to the biz in 2005 will ever come back.

The spate of recent fund announcements from China (CMM, Harvest Seven Stars, Yao Ming, Paul Y Engineering, SAIF Partners, etc.) must have more than a few unscrupulous individuals in the U.S. scheming about ways to strip the fresh round of film investors clean of their dollars and renminbi. But China ain’t Wall Street, and it’s unlikely that the pickings will be quite so easy this time, if there is indeed a new wave of money coming.

For one thing, the Chinese investors may not know much about the global film industry or even how business is done in the U.S., but most are smart, savvy, and conservative with their capital. Having done business with numerous Chinese funds and high net worth individuals, I’ve found them to be way ahead of all the hedge fund kids I dealt with in their sophistication about the ways of the business world. Most of them survived the tumult of China’s Cultural Revolution, and have risen to the top of a business and political environment that has no rule of law and throws a multitude of roadblocks in the way of any individual’s success. To them, Hollywood’s con artists are amateur punks.

That’s not to say, of course, that Chinese investors are immune to mistakes or that they can’t be fooled. And that’s why, if we in Hollywood hope to have a long term relationship with China, we’re going to have to treat these investors differently. If you’ll indulge me in a bit of ‘Jerry Maguire’ style pontificating, we could all stand to be a little more enlightened about how we treat the money. I’m talking about working earnestly to understand the investors’ motivations and keeping their best interests in mind.  Being willing to meet them halfway. Let’s not poison the well this time. And let’s be mindful that, in Chinese, the word ‘greedy’ ( 貪 ) and the word ‘poor’ (貧) look almost the same.

Robert Cain is a producer and entertainment industry consultant who has been doing business in China since 1987. He can be reached at rob@pacificbridgepics.com and at www.pacificbridgepics.com.