Mickey V. Dragon: Shanghai Disney Challenges China's Domestic Theme Parks

At the Fantawild Adventure amusement park in Wuhu, eastern China
At the Fantawild Adventure amusement park in Wuhu, eastern China
Yu Shuhong

SHANGHAI â€" After five years of construction, Shanghai Disneyland will be inaugurated on Thursday with much fanfare. And with the arrival of China’s first park from the American entertainment conglomerate, many Chinese players in the theme park business are asking if the proverbial "wolf has really come" this time â€" dressed as Mickey Mouse.

But there are signs all around that the industry remains bullish. Most recently, Wanda group, China’s largest property developer and the world’s biggest cinema chain operator, opened a cultural tourism hub on May 28 in Nanchang, about 700 kilometers (435 miles) from Shanghai.

Within the last few years, more than 300 theme parks have been built across China. Last year alone, 21 new parks were inaugurated while another 20 are undergoing construction.

As a survey conducted this year by Guotai Junan â€" one of China’s largest investment banks showed â€" Shanghai Disneyland will attract more than 12 million domestic and foreign tourists annually. With a weekday admission fee of 370 RMB ($56) per person, this means an annual total of over 4.4 billion RMB ($667 million) of ticket sales. Meanwhile, boosted by an estimated increment of 1 RMB driving 8 RMB, in tourist-related business such as transport and hotels, the single Disney park will bring about 35 billion RMB ($5.3 billion) growth for the whole tourism industry.

With the construction of the Universal Studio theme park broke ground last November in Beijing another American giant is scheduled to open in 2019. It is expected to generate just as many visitors as Disney.

Liu Daoqiang, chairman of Fantawild, a local cultural and scientific park company investing in new locations, does not see a zero-sum game with the Americans' arrival. "The entry of McDonald or KFC didn’t stop us eating Hunan or Sichuan cuisine," Liu said. "It just means people have more options."

With aims of becoming the world’s top tourism enterprise, and indeed considered a serious rival to Disney, Wanda’s medium-term target is to open up to 15 new locations within China for Wanda City, a type of diversified mega complex that combines entertainment, shopping, catering and luxury hotels â€" as well as three to five abroad by 2020.

Fantawild has already achieved Wanda group’s goal by operating 20 small and big theme parks in China. They welcomed 23 million visitors in 2015, a year-on-year increase of 77.4%. Fantawild wants to open 40 parks within the next five to 10 years, and to own at least five theme hotels in the next three years.

Dai Bin, president of the China Tourism Research Institute confirmed that Chinese demand for leisure and travel is increasing. The risk of a glut of theme parks is offset by a "herding effect" among those visitors who draw others.

According to the US consulting firm AECOM’s forecast, China's tourism market is worth $610 billion. This number is expected to double by 2020, with the country eventually surpassing the United States as the world's largest theme park market.

Taking on Disney

Whether in terms of project positioning or choices of sites, Chinese theme parks take a different path from that of the American giant: They are mainly counting on the number of entries, lower admission fees, scale consumption, and the virtue of their local advantages.

Most Chinese local theme parks are located in second, third or even fourth-tier cities. Apart from the consideration of land cost, it’s also to offer a taste of the exotic. "If the parks are too close to home, people think it’s just like doing your daily errands," explained Liu Daoqiang. "You've got to let them drive two or three hours and make them feel like they're having a travel experience."

Chen Huijun, vice president of Fantawild, believes that Disney’s advantage does not lie in the technology of its park offerings, but rather on its animation brands. Chinese local parks lack the intellectual property and content base of both Disney and Universal Studios.

But Chinese theme parks are trying to catch up by copying the same business model. Fantawild’s series of three films, Boonie Bears, have created some recognizable cartoon images that have since been presented in the parks and "gave birth to numerous derivatives," Chen Huijun pointed out.

Boonie Bears â€" Source: Fantawild Holdings

Fully integrated fun

Despite the vigorous investments in theme parks, some worry the bubble will burst nevertheless. According to a study published by the Prospective Industry Research Institute, 70% of Chinese parks currently operate at a loss. Some 20% break even, while only 10% make profits. The fundamental reason is that theme parks require huge investments, while the payback period is particularly long.

Liu Daoqiang says foreign theme parks operate very differently. They adopt a joint-venture model and most often the asset-heavy side lies on the local government or the firm they cooperate with. In Liu’s opinion, Disney’s investment of 36 billion RMB ($5.5 billion) is mostly about branding.

As for Wanda, the Chinese giant is relying on its own diversified upstream and downstream industrial chain. Thanks to its vast hotels and resorts across China, Wanda has formed its own scale and brand advantages. In the past three years, the group has also acquired more than 13 of China’s top online and offline travel agencies to ratchet up its sales channels.

By comparison, some are convinced that Wanda has a more extensive profit resource and potential than Disney thanks to the massive amount of properties it owns, its integrated tourism as well as land development.

Counting on government subsidies

At the same time, as this newspaper learned, major Chinese theme parks all receive generous government subsidies. Take Fantawild as an example: From 2013 to the first half of last year, it received more than 5 billion RMB ($758 million) in subsidies from the government. Meanwhile, preferential fiscal policy also indirectly helps these companies’ profitability. Tax incentives accounted for 12.96%, 19.16% and 19.91% of Fantawild’s net profits, respectively over the past three years.

Chinese authorities attach great importance to fostering the cultural industry, and have set up a large number of special support funds in recent years. Meanwhile, local governments are eyeing how theme parks can create employment and stimulate local consumption, which in turn contributes to local economic development brought about by the same theme parks. Mickey would be proud.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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