Trump and Clinton Actually Agree On Something! Trade!

 

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This year’s presidential election has been classified as everything but gratifying. Hillary Clinton and Donald Trump have haphazardly disagreed on almost every national issue that has come up in debate. However, one issue they both agree on is to not implement the Trans-Pacific Partnership.

This trade agreement, referred to as the TPP, aims to promote economic growth, creation of jobs, enhance innovation and productivity, raise living standards, reduce poverty, and promote transparency, good governance, and enhanced labor across the 12 Pacific Rim countries, not including China (USTR). The creators of the TPP believe that they will achieve these goals by creating measures that lower non-tariff and tariff barriers to trade.

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This trade agreement was proposed as an expansion of the Trans-Pacific Strategic Economic Partnership Agreement in 2005 (USTR). The U.S. signed in agreement with the trade proposal in 2008 and was one of the 12 countries included in the finalized agreement that was completed in February of this year. Implementing the TPP has been one of the trade agenda goals of the Obama administration (USTR). However, now that a new president is coming into power, the smooth implementation of this trade agreement will be affected, which could have detrimental effects on the U.S. economy.

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The U.S. International Trade Commission estimates that the TTP will create 128,000 new jobs, increase annual U.S. income by 0.23% and raise our real GDP by 0.15% (USTR). Obama believes it will do this by opening up foreign markets for exporting goods and bettering standards for working conditions in 11 other nations. However, Clinton and Trump are not convinced.

The 2016 presidential candidates believe that the deal will actually hurt American workers (BallotPedia 2016). Trump declared, “I am going to withdraw the United States from the Trans-Pacific Partnership, which has not yet been ratified” (BallotPedia, 2016).

He also claimed, “we will move manufacturing jobs back to the U.S. and we will Make America Great Again” job-losses(BallotPedia, 2016). Hillary, on the other hand, was suspected of being in support of the TPP agreement when working under the Obama Administration. However, in May of 2016, she said, “I oppose the TPP agreement – and that means before and after the election.” She made another comment about the issue in March, when she claimed that one of the reasons she opposed the TPP is because the final proposal has too many loopholes, which will allow countries and citizens to be taken advantage of (BallotPedia, 2016).

Providing jobs to American citizens is one of the most essential aspects of a country’s economic success. The TTP encourages free trade, which supports the idea of importing goods from other countries on a large scale. As a result, this trade agreement will actually decrease the amount of jobs in America by encouraging cheap production and manufacturing overseas. If the country’s new president decides to remove the U.S. from the TPP agreement, it would wipe out years of Obama’s hard work in promoting economic growth through trade. However, it might be necessary, if America wants to promote production and innovation within our country’s borders.

Works Cited:

https://ballotpedia.org/2016_presidential_candidates_on_the_Trans-Pacific_Partnership_trade_deal

https://ustr.gov/tpp/

 

Barreled & Tapped: The History & Impact of San Diego’s Craft Beer Scene

San Diego is known for its robust craft beer scene, but it’s the history and economics behind this industry that makes this city shine in a nation filled with craft beer cities. According to the Brewer’s Association, in 2014, small and craft breweries contributed $55.7 billion to the U.S. economy and supported over 424,000 jobs with 115,000 directly at breweries or brewpubs. In San Diego, for every brewery job that is added within county, 5.7 jobs in supporting industries are created. The rich history, educational practices and connectivity between brewers and has allowed more breweries to open led to success of San Diego craft beer.

Craft beer may reign in San Diego, but it didn’t start there. The story of beer actually started in Mesopotamia in 5 BC with the Sumerians who participated in the brewing and drinking of beer that was passed down from generations through a poem. Oxford scholars found this poem from1800 BC that involves Ninkasi, the goddess of brewing, and the production of beer from barley. Thousands of years later in North America, Spanish missionaries came to spread Catholicism and brought fermentation practices that produced sacramental wine, which would eventually be used in the beer making process. When the Mexican government gained independence from Spain and in 1848, the United States took the region of San Diego from Mexico.

Beer making in San Diego can be traced back to 1868 when Conrad Doblier began brewing European-style beer as an emigrant from Austria as a brewer. In 1868, two breweries were created in San Diego named the San Diego Brewing Company and Mission Brewery. During Prohibition from 1920-1933, many San Diegans moved south to Tijuana, Mexico in order to produce and drink beer legally. While there, they opened Aztec Brewing Company and Mexicali Brewery, which soared in popularity due to the low supply and high demand of alcohol in the U.S. At the end of Prohibition in 1933, the San Diego Brewing Company and Aztec Brewery were responsible for 25 percent of California’s beer production. Once beer powerhouses like Anheuser-Busch, Coors Brewing and Miller Brewing started their production of beer in the 50s, they caused commercial beer production halt in San Diego breweries until 1987.

San Diego’s craft brewery scene started again in the 80s when California legislation was passed that legalized the brewpub throughout California. It also made commercial production ands sale of beer in restaurants and home brewing legal, giving beer enthusiasts the chance to capitalize on their hobby. Home brewers started swapping recipes, experimenting and eventually, built the connection between brewers in San Diego that exists today. However, during the 80s, one brewery stood out as the founder of this new era of beer. It is the story of two best friends who formed the Karl Strauss Brewing Company. Chris Cramer and Matt Rattner opened The Karl Strauss Brewing Company in Downtown San Diego and kick-started the craft brew revolution on February 2, 1989. It was the first brewery in operation since the 50s and the first-ever brewpub in San Diego. The 1980s marked a period of brewing pioneers innovators and craft brewers in the U.S. had gone from eight in 1980 to 537 by 1994, with Karl Strauss as one of them. Today, there are 518 craft breweries opened in California alone, the most out of any state, with over 120 located in San Diego.

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www.beercoasters.eu

Karl Strauss started their business by only brewing a golden ale, an amber lager and a dark brown ale. Because of their innovative flavors that challenged the typical light beers that were on the market, there was a high demand for Karl Strauss beer and in 1991, Karl Strauss opened a distribution center in order to ramp up their production. Today, Karl Strauss has eight brew pub locations and has plans to open a second distribution center because of the demand for their beer. Even though they only distribute their beer in California, Karl Strauss is ranked the 45th– for the largest volume of craft beer distribution in America out of 3,000 breweries. According Karl Strauss, “craft beer is not just a job, it’s who [they] are.” This can be seen through their extensive network they created with employees that were mentored at their brewery and branched out on their own.

Karl Strauss started the careers on many brewers in San Diego who added the to culture of education and family. According to the founder of Karl Strauss, Chris Kramer, “One of the reasons why San Diego has become such a mecca for craft beer is we started off with a group of individuals who were friends and collaborative rivals.” This is still true today and is the reason why San Diego’s craft brewery scene is so interconnected. Many employees who had their start at Karl Strauss opened their own breweries, adding to the ever-growing family of craft brewers in San Diego. Karl Strauss’ original bartender, Scott Stamp, opened the San Diego Brewing Company and their first-ever waitress; Gina Marsaglia opened the ever-popular Pizza Port in 1992 with her brother Vince. In addition, Karl Strauss’ original tour guide, Jack White, opened the renowned brewery Ballast Point in San Diego in 1996, which is now the 11th brewery in America for its wide distribution, innovative flavors and unique offerings. The small craft brew circle that started at Karl Strauss has promoted the art of beer making is one of the reasons why San Diego craft brewing is successful today.

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sandiegohistory.org

The interconnected nature of the San Diego craft industry started with Cramer and Rattner in 1989, but the San Diego Brewer’s Guild allowed the craft brew industry to continue to grow in San Diego. Founded in 1997, the guild was created with two goals: to promote San Diego’s brews and to create an open line of communication between brewers. This type of communication has allowed San Diego to continue to grow the industry while also keeping the competitive market friendly with the sole goal of promoting the craft as whole rather than individual businesses. The guild advances their mission to, “promote… locally brewed beer through education and participation in community events.” Craft powerhouses like AleSmith Pizza Port, Stone Brewery, Green Flash and Karl Strauss are all members of this coalition, making it easier for brewers to unite within San Diego. Although there are guilds throughout the U.S. that promotes craft beer, the SDBG is different because their breweries continue to innovate together within San Diego. As a team in 2014, San Diego breweries dominated the World Beer Cup where they won 11 of the 14 medals awarded. During the World Beer Cup in 2016, the SDBG won more medals than the entire United Kingdom and even beat-out Germany in the category for Kölsch, which is a German style beer. Just this October, the SDBG took home another 18 medals at the Great American Beer Festival in Denver, Colorado, cementing San Diego as a destination for craft beer innovation. Denver is often thought of as a craft-brewing center as the home of the Great American Beer Festival, but only won eight medals.

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Great American Beer Festival

The strong dynamic to promote the craft within the industry and become a world competitor as a city has been promoted by the San Diego Brewer’s Guild but has remained a part of the craft culture with San Diego as well. . Because most brewers had their start at other breweries, they formed a sense of respect and trust for the craft culture in San Diego. When Vinnie Cilurzo created the Double India Pale Ale in 1994 in San Diego County, nearly every brewer has embraced this style of beer in San Diego. In fact, San Diego is now internationally known for their Double IPAs, which is often referred as the San Diego Pale Ale. Stone Brewery, Karl Strauss and AleSmith, all a part of the SDBG, are famous breweries that carry the torch of the Double IPA today. The creativity and education that solidified the bonds between brewers allowed many brewers to leave the breweries they worked at to form their own and create a craft beer boom in San Diego.

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voiceofsandiego.org

Between 2009 and 2011, nearly 40 breweries opened in San Diego causing a surge in the craft beer market. In 2011 alone, the county’s brew pubs generated $300 million to the county, generated over $600 million in sales and created more than 2,800 jobs in San Diego. The expansion of breweries in San Diego translates to a boom of jobs and contributions to the local economy through these jobs, revenue and taxes to the City of San Diego. During this time, more brewers came to San Diego than competing cities because of the respect the city has garnered for itself and wages provided. In 2012, San Diego had the highest average wage for brewery workers in the U.S. compared to Portland and Denver, which are often regarded in the same category. Today, the wage gap has closed where the average salary is around $36,000 a year. Although wages slowed in 2014, the craft brew sector grew overall and had a direct economic value of $600 million, which is twice the amount three years prior. This figure is generated based on San Diego’s 120 local breweries and their revenue, profits, wages and jobs the industry produces. Wages may have helped grow the craft industry, but it is education portion that diversifies San Diego from other brewing regions.

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NUSIN Institute

According to the NUSIN Institute, San Diego provides more education programs for industry professionals entering the craft beer market than their competitors. These types of programs further the industry and allow brew masters to pass on their knowledge within the industry. There are two major education programs in San Diego: the San Diego State University College of Extended Studies Business of Craft Beer Professional Certificate and the University of California– San Diego Extension Brewing Certificate. Both were founded in 2013 and follow the mission of the SDBG to promote local beer through education. In addition, many brewers encourage their employees to participate in the Cicerone Certificate Program, which was created in 2008 to educate people and create craft beer leaders. Similar to sommelier training in the wine industry, the Cicerone program trains professionals in the knowledge of beer in sales and services. In the NUSIN Institute study, 57 percent of craft breweries indicated that their employees participated in the Cicerone Certificate Program. Karl Strauss is one brew company that prides themselves on having multiple employees that are certified Cicerones and beer servers because, “everything from beer and food pairings to style education is part of the Karl Strauss experience that goes above and beyond what you’ll find anywhere else.” It is experiences like this that adds an extra layer of knowledge to employees and education to customers on their journey of beer in San Diego further expanding art of beer making into other industries in San Diego.

Jobs are being created within the craft brew industry and in supporting fields. Throughout the county, NUSIN has identified that one third of local industry jobs are directly relate to brewing while two thirds focus on brewpub operations. Brewpubs are dependent on food service and hospitality sectors that are composed or hosts, servers and cooks. Because of this specialized nature of brewing, supporting fields have popped up within San Diego such as: brewing equipment design and manufacturing, packaging, sales and marketing, brewing labs, home brewing supply stores and hops and farming. All of these industries that have an impact on the brewing process generates an average $56.6 million in sales annually.

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NUSIN Institute

San Diego is a hub for the innovative beer market because of the rich history of beer making and the connections between brewers that has allowed the city to work together to educate people and produce beer as one unit. These factors are the reason that San Diego has its own IPA category of beer and produces more than 2,000 unique beers annually. If Karl Strauss had not started the craft sector in the 80s, the industry would not be the same. It is the need for creative flavors, friendly and collaborative rivals and the growth of an industry that Karl Strauss created that keeps the San Diego craft beer industry alive today. It is also the reason why they won mid-size brewing company and brewer of the year at the 2016 Great American Beer Festival. If the San Diego craft beer industry stays true to their message that craft beer is a family network that succeeds based on innovation, education and interconnectivity, there is a chance that the beer bubble won’t bust for a while longer and small batch brewers will continue to succeed.

Chinese Billionaires Are Taking Over L.A.

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Since the beginning of this century, China’s economy has grown at a notable rate, reporting double-digit GDP growth each year. As a result, there have been massive levels of wealth and a new population of Chinese billionaires. However, in the last five years, the Chinese immigrant population in the United States has increased by about 400,000 people, with about 25,000 of them being millionaires (China File, 2015). This causes economists to examine why so many wealthy Chinese are moving to the United States and how their movement is affecting the U.S. economy.

Although China has one of the world’s largest economies by measure of GDP, with consumption making up 71% and a debt exceeding 250% of their GDP, China’s economy proves to be anything but stable (The Hindu, 2016). Much of this instability is backed by the fact that the Chinese government has been inflating their GDP data through massive rates of increased spending. It also has to do with the fact that there is decreasing momentum in the service sector and a steep decline in the manufacturing sector. Since these sectors make up the largest part of China’s economy, it has made millionaires desperate to get their money overseas because they are unsure of the value that their fortunes will hold in years to come.

Another reason why Chinese millionaires are wary is because of the massive crackdown on corruption that was started in 2013, when President Xi Jinping came into power. This decision was intended to boost citizen morale by reducing the harsh divide between ordinary Chinese and party officials (Williams-Grut, 2016). However, since this crackdown, about 300,000 government officials have been punished for “allegations of bribery, abuse of power or other corrupt practices,” causing many of them to worry about the fate of their fortunes (BBC, 2016). Therefore, in order to protect themselves, many officials are trying to hide the money they earned illegally by investing it abroad.

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Karen Weise, a reporter from Bloomberg, found that Chinese nationals hold around $660 billion in personal wealth offshore, with $22 billion of that being spent on homes. This movement of Chinese money, especially in the housing market, is present all over the United States and shows no signs of slowing down. These Chinese invest in American real estate because it is a safe market and many cities offer benefits like great neighborhoods and schooling. Therefore, in response, real estate has had to cater to the incoming Chinese millionaires by changing city landscapes, which, in turn, has affected many cities existing demographics.

As of 2015, it was reported that 64% of China’s 1.3 million millionaires have emigrated or have plans to move to the United States in the next five years (China File, 2015). These immigrants are moving all over the country; however, one of the most concentrated examples of a city adapting to wealthy Chinese immigration can be seen in Arcadia, CA.

Arcadia is a city 20 miles northeast of Downtown Los Angeles that has become a haven for wealthy Chinese residents. In 2016, it was reported that 59% of Arcadia’s 56,000 residents were Asian. This compares to 2000, when Asian’s only made up 45% of the population, 34% of that percentage being Chinese (U.S. Consensus). Over the last 16 years, Arcadia has attracted tens-of-thousands of Chinese millionaires by offering a first-class schooling system, large homes to live in, a nice neighborhood to raise children, and a pre-existing Asian population. These services have not only transformed the city’s landscape, but have also created great changes in Arcadia’s real estate sector.

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As Chinese immigrants started to immigrate to California, realtors saw this as the perfect opportunity for financial gain. Therefore, to attract this specific Chinese market, architects and developers changed Arcadia’s landscape by building similar styled mansions ranging anywhere from $2 million to $7 million all over the city. Most of the homes reflect the Chinese philosophy of feng shui and face the south, which are two important aspects of Chinese culture (Hawthorne, 2014). Chinese culture is deeply rooted in tradition; therefore, Chinese immigrants are often more attracted to the mansions that honor their culture. Real estate developers also try to attract Chinese millionaires by creating mansions that include wine cellars, theaters, double-height entry halls, elevators, many master bedrooms, and a separate wok kitchen (Hawthorne, 2014). Architects and developers make a conscious effort to build these Arcadia mansions to appeal to wealthy Chinese immigrants in the hopes of earning a large profit.

Just in 2013, one Arcadia realtor, Peggy Fong Chen, sold over $71 million worth of homes in Arcadia (The Chinese Beverly Hills, 2014). According to Jue Wang, Chinese millionaires have been moving to America because they feel uneasy about their real estate investments in China’s unstable real estate market. Also, because of the income and wealth disparities in China, rich people have come to feel unsafe, causing homes in America to look even more attractive. However, for the most part, she said that these large Mc-mansions are in high demand because it gives millionaires a place to store their money.

While many of the mansions in Arcadia have semi-circular driveways lined with Range Rover’s and Porches, when getting a closer look, many of the homes actually appear to be unoccupied. A member of The Arcadia Homeowner’s Association estimated that 20% of these new mansions sit empty (Weise, 2014). This confirms that many Chinese are using these homes as a place to store their money. Realtor, Peggy Fong Chen, said that many of the million dollar homes she sells are paid for in cash. By paying in cash, Chinese millionaires are making it almost impossible for the Chinese government to trace the money that is being invested overseas.

Although this is an issue for the Chinese government and their economy, the U.S. has truly benefitted from the billions of dollars that Chinese foreigners have spent on American soil. For example, in 2014, Arcadia brought in a record revenue of $7.9 million just from fees for building permits and developments, which is a 72% increase from the previous year (Weise, 2014). Wealthy Chinese immigrants also helped the U.S. economy during the recession of 2009. During this time, China’s elites were affected but held on to the bulk of their wealth. Therefore, as America was facing a time of dramatic economic downturn, Chinese millionaires continued to move to the U.S., bringing millions of dollars with them. This money was then used to hire workers, pay for goods and services, and to help keep businesses afloat.

The United States government understands the influence that wealthy Chinese immigrants can have on the American economy. Therefore, in the hopes of sparking American investment, the U.S. government created a program to attract wealthy foreigners in 1990. The program states that if wealthy foreigners invest at least $500,000 in an American business and employ at least 10 American workers, they are eligible to apply for a green card known as the EB-5 Visa. As of 2014, Chinese nationals received 85% of the 10,000 American visas offered. Therefore, through this plan, the U.S. was able to generate at least $4,250,000,000 in investments, not including the money Chinese immigrants spent once they were in the U.S.

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As much as this influx of wealthy Chinese immigrants can be beneficial to a city, it can also create problems throughout society. One problem is with long-term residents who feel like their cities are being commercialized solely for the purpose of financial gain. For example, people who have grown up in Arcadia have watched their hometown turn into a “Chinese Beverly Hills” lined with mansions that are not even occupied. As stated before, since 2000, Arcadia has experienced a 14% increase in their Asian population. This means that 14% of the former, mostly white, residents have moved out of Arcadia, many of them moving because developers have offered high prices to flip their average homes into Mc-mansions. In this case, it is clear that the wealthy Chinese immigrant population contributes to the gentrification of Arcadia by replacing the homes of it’s former citizens with giant mansions that better meet the needs of the new Asian millionaires. This not only promotes sentiments of elitism, but it also angers residents who feel like their city is being commercialized for the sole purpose of financial gain.

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Another potential problem to be considered is that Arcadia is experiencing growth at an extremely fast rate that does not seem to be sustainable. Developers must be conscious because the amount of money that is being poured into these projects could be contributing to a real estate bubble. For example, on Zillow, there was a one-story home that was purchased in 2012 for $980,000. Then in 2013, a 5-bed room, 6-bath home popped up at the same address for $3,438,000, showing that developers are buying cheap homes and then replacing them with multi-million dollar to please the incoming Asian population.

Another example is just a few blocks away at a 3 bedroom, 2-bath house that was sold for $428,000 in 2012. Just this month, the same house was listed for about $2 million. This shows that because of multi-million dollar mansions that popping up throughout the city, the prices of the smaller homes are starting to rise as well. If developers continue building mansions we will eventually end up running out of resources or buyers. Therefore, developers must make a cautious effort to only create supply when there is demand, to avoid a real estate bubble.

Works Cited:

“Arcadia Population and Demographics (Arcadia, CA).” Arcadia Population and Demographics

(Arcadia, CA). Web. 22 Oct. 2016.

Bertrand, Natasha. “This California Suburb Has Become a Haven for Wealthy Chinese

Residents.” Business Insider. Business Insider, Inc, 02 Feb. 2015. Web. 6 Oct. 2016.

Hawthorne, Christopher. “How Arcadia Is Remarking Itself As A Magnet for Chinese Money.”

Los Angeles Times. Los Angeles Times, 3 Dec. 2014. Web. 9 Oct. 2016.

Hooper, Kate, and Jeanne Batalova. “Chinese Immigrants in the United States.”

Migrationpolicy.org. 05 Feb. 2015. Web. 18 Oct. 2016.

Scutt, David. “China’s Economy Is ‘still Weak and Unstable'” Business Insider. Business Insider,

Inc, 02 Mar. 2016. Web. 12 Oct. 2016.

VocativVideo. “The California Town Where Chinese Millionaires House Their Kids-and

Mistresses.” YouTube. YouTube, 05 Dec. 2014. Web. 2 Oct. 2016.

Wang, Jue. “Chinese Homebuyers Heat up LA’s Real Estate Market.” US-China Today. 4 Apr.

  1. Web. 10 Oct. 2016.

“Wealthy Chinese Are Fleeing the Country Like Mad.” ChinaFile. 3 Feb. 2015. Web. 10 Oct.

2016.

Wei, Lingling. “China Challenged to Keep Yuan Stable as Dollar Rises.” WSJ. Wsj.com, 16 May

  1. Web. 10 Oct. 2016.

Weise, Karen. “Why Are Chinese Millionaires Buying Mansions in an L.A. Suburb?”

Bloomberg.com. Bloomberg, 14 Oct. 2015. Web. 11 Oct. 2016.

Williams-Grut, Oscar. “China’s Corruption Crackdown Is so Strict That Even 2,400 Anti-bribery

Officials Were Probed.” Business Insider. Business Insider, Inc, 25 Jan. 2016. Web. 16 Oct. 2016.

Should Americans Kick Shoe Tariffs?

Last year, Nike brought back their Air Cortez sneaker in the White/Varsity Royal-Varsity Red color scheme– the very same style Tom Hanks was seen donning in the 1994 movienike-rereleases-forrest-gump-nike-cortez-colorway-2-202x300 Forrest Gump. Producing this shoe is incredibly labor-intensive– its leather stitching, exposed padding on the nylon tongue, and crisp white laces have undoubtedly been produced in one of hundreds of thousands of Nike’s manufacturing plants outside of the United States. However, a significant portion of what consumers pay for when purchasing shoes like the “Forrest Gump sneaker” go not only towards manufacturing costs, wages, and shipping, but also tariffs and shoe taxes. Unbeknownst to many, outdated shoe tariffs have been contributing to the rising costs of shoes and have led to many Americans, like Forrest Gump, running their shoes into the ground.

In status-driven industries like fashion, there tends to be a high demand for stylish, high-quality products at a fraction of the cost. With a globalized economy and companies increasingly outsourcing plants to take advantage of cheaper labor, locally produced brands have found difficulty competing with low prices. In order to counter the low costs of the textiles and apparel imports, the United States government has imposed incredibly high tariffs of up to 67.5 percent compared to an average 1.4 percent on most other goods to protect the United States’ dwindling domestic manufacturing supply chain (The Hill).

The shoe tariff was created in 1930, when the United States boasted a large domestic footwear manufacturing base (The Hill) that needed protection from foreign companies. Back then, footwear manufacturing was even more labor intensive than it is now, with each stitch handmade and leather tediously done. Numerous European craftsmen brought with them knowledge and credibility in the art of shoemaking, which helped the United States manufacturing base flourish. Since the rapid globalization of the shoe industry, cheaper labor across seas made manufacturing in the United States less practical. Today, European shoemakers are no competing with the United States for shoe manufacturing, but counterfeits and cheaper goods from countries like Vietnam and China.

Generally, imposing high tariffs are meant as a supportive measure for the domestic manufacturing market. Raising prices of incoming goods keeps prices competitive for imports and domestic products, thereby encouraging United States consumers to continue supporting the United States economy on a local level. In the United States, over 99 percent of shoes are imported, mostly from Asia (Wall Street Journal). However, these tariffs still exist to protect the remaining one percent, whilst most Americans cannot name three American shoe companies manufactured in the United States.

An example of a company benefitting from the high tariffs is New Balance, an American sneaker company, and one of the last to continue manufacturing in the United States. Even New Balance, however, says that it is struggling to keep manufacturing in the United States. Though Mr. DeMartini, CEO of New Balance, insists on keeping manufacturing in the United States, stating that New Balance’s U.S. plants are “twice as effective” as Asian plants, and that “we learned a lot because we had to in order to survive” (Wall Street Journal), the company is still facing difficulties to keep work in the States. New Balance still manufactures two-thirds of its shoes across waters, and relies heavily on machinery in order to keep costs profitable. This begs the question: Are the high tariffs imposed on shoe companies simply supporting jobs that we can no longer afford to keep in the United States? And, if this is the case, are American consumers the ones suffering the burden through unnecessarily high costs of shoes in order to protect that small one percent of shoes manufactured here at home?

Nike is one company protesting the high tariffs. Nike claims that current money going towards tariffs and taxes could go towards research and development advancing sustainability and innovation. The company argues that lowering tariffs can actually increase manufacturing jobs in the United States by allowing the company to develop advanced manufacturing methods that would make keeping jobs in the U.S. more practical. Last year, Nike had upwards of $28 billion in sales, $2.7 billion of which went towards taxes and tariffs (Nike declined to state what percentage of tariffs went towards shoe sales specifically) (NPR).

The refootwear-tariff-pic-impacting-childrens-shoes-1024x829maining 99 percent of shoes manufactured abroad pay a significant portion of their budget towards shoe taxes, which in turn ups the prices of shoes for unsuspecting Americans. Whilst shoes are considered a necessary household expense, the highest shoe tariffs seem to be on shoes that are supposed to be cheapest– children’s shoes and low-cost-to-produce sneakers. According to Economist Bryan Riley, shoe tariffs increase costs of the cheapest shoes by about one-third. This in turn impacts how families living paycheck-to-paycheck end up spending money in other household necessities, like groceries. Purchasing goods and services to support their children and their family’s health are affected unnecessarily.

Americans should take a second look at how the tariff can be impacting their everyday purchases. Though the 1930s Tariffs once held a significant purpose in the United States economy, it has since lost its importance as American manufacturing work has traveled overseas. Though some may consider sparing a few dollars to keep the few American manufacturing jobs that select shoe companies have maintained, those most negatively impacted by the tariff are those who can’t afford to.

Sources:

 

http://www.usalovelist.com/american-made-shoes-ultimate-source-list/http://www.aei.org/publication/the-us-has-imposed-protective-shoe-tariffs-on-americans-for-decades-even-with-no-domestic-shoe-industry-to-protect/

The Economy and a Pair of Shoes

http://www.npr.org/sections/itsallpolitics/2015/05/08/405196569/would-lower-shoe-tariffs-actually-encourage-american-jobs

http://thehill.com/blogs/congress-blog/economy-budget/264019-footwear-needs-tariff-relief

http://www.wsj.com/articles/SB10001424127887323764804578312461184782312

http://money.usnews.com/money/personal-finance/articles/2011/10/28/how-consumers-and-communities-can-benefit-from-buying-local

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/09/21/the-wasteful-culture-of-forever-21-hm-and-fast-fashion

http://www.forbes.com/sites/danikenson/2013/07/23/textile-protectionism-in-the-trans-pacific-partnership/#275d91d593a8

http://www.wsj.com/articles/SB10001424127887324735104578123523795505336

http://hypebeast.com/2016/7/nike-classic-cortez-og-forrest-gump

 

 

Misused Policy: China’s Electric Vehicle Subsidy Fraud

The Chinese government has poured 33.4 billion yuan in subsidies since 2009. The government decided to establish a world-leading industry and increase jobs and exports, and to reduce oil dependence and the urban pollution. The incentive policy offers subsidies to encourage the companies that build electric cars, plug-in hybrids and fuel-cell vehicles to produce and sell electric vehicles (EVs). But a report from the Ministry of Finance of China exposed that at least five automakers defrauded the government for a total of 1 billion yuan ($150 million) in subsidies aimed at promoting EVs in September 2016.

Since some incentive regulations were vague and under weak supervision, speculators learned how to reap the benefit from a poorly crafted subsidy system the government had launched. For example, a big portion of the subsidies flowed into unqualified or non-existing cars made by dishonest companies. One of the bus manufacturers involved in the scandal was the Higer Bus in Suzhou, which received about a half billion yuan in subsidies through sales inflation. The five companies defrauded an average of 25,000 yuan per car, according to the government report.

In some cases, the manufacturers sold unqualified or faulty cars to related parties (for example, the companies’ own leasing subsidiaries). After the companies received the subsidies from the government, the buyers returned the cars. In other cases, the makers installed dysfunctional batteries or even one battery in different vehicles.

The high profit under the government support cultivated another deal model between the sellers and the buyers. An electric bus worth one million yuan would be priced at two million yuan. The buyers only needed to pay one million yuan, but the sellers forged a two million yuan receipt to apply for the government subsidy.

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China saw a big boom of EVs in 2015

The government planned to phase out the subsidies on the EV industry from 2016 to 2020. The manufacturers stepped up the production by adding incomplete or unlicensed vehicles, especially in the end of 2015. The total number of EVs sold in the fourth quarter increased by 92,000 dramatically. The monthly production in December 2015 quadrupled compared to the number in December 2014. Higer Bus sold 2,000 EVs with 83.9 percent incomplete in December 2015, which amounted to one-fifth of the company’s yearly sales.

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China’s EV Subsidy Criteria during 2013-2015

The policy designed to support the EV industry hurt the market instead. The vague criteria in the incentive policy lowered the threshold for receiving subsidies. Under the standard from 2013 to 2015, the amount of subsidies an EV could receive was mainly based on its range (mileage) or length. There were no rigorous standards for the vehicles’ technology and actual quality.

The subsidies have been blamed for attracting the ‘wrong crowd’ according to Zhang Zhiyong, a Chinese market commentator and auto-analyst based in Beijing. Many new players in the market decided to make EVs just to get the subsidies. They came not with previous manufacturing experience or R&D input, but with a gold-rush mentality.

China registered the largest amount of plug-in electric vehicles (PEVs) in the first quarter of 2016, yet ranks lowest on the Plug-In Electric Vehicle Index, which is a quarterly index tracking the production effectiveness and impact of the PEV market in different countries. “Despite having more than 200 manufacturers of new-energy passenger vehicles, buses and special-use vehicles, China still lags behind global leaders in terms of quality, reliability and key technology,” said Wang Cheng, an official at the China Automotive Technology and Research Center.

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According to the subsidy policy from 2013 to 2015, a qualified minibus with a length of three to four meters can help its maker receive subsidies ranging from 300,00 to 600,000 yuan. To get the subsidy, the company didn’t even need to know how to manufacture the electric bus; the company only needed to buy a 20,000-yuan diesel-engine bus and install an electric battery.

Though unqualified EV companies have cheated on the subsidy system, it does not mean the government support is unnecessary. Government incentives for EV industy are common practice in several national and local governments around the world, such as France, Germany, Japan and the United States. EV programs in these countries also encourage the residents and local bus transit agencies, which target more relevant parties than just the car makers. For example, California established the Clean Vehicle Rebate Project, which allows residents to get up to $7,000 for the purchase or lease of an EV. The transit agencies can benefit from the program of Electric Vehicle Supply Equipment Loan and Rebate. “They are set up to encourage local agencies to purchase electric vehicles like those from BYD, which help the environment while growing jobs here in California,” said the PR spokesman Joshua Goodman from BYD USA, an EV bus manufacturer with its headquarter in Los Angeles, “the California Air Resource Board also offers several different incentives to us (the EV manufacturers).”

Foreign countries’ practice offers good examples that China can learn from. The leading industry does not contradict the support from the governments. But a germane policy is in need. The Chinese government is trying to improve its policy now . The regulators plan to impose tougher policies on incentives, such as stricter technology standards on manufacturers. The government also considers limiting the number of startup EV makers to a maximum of ten.

Works Cited:

Bloomberg News. China Swats ‘A Few Flies’ to Temper Electric-Car Maker Excesses. Web. 11 September. 2016.

An Limin, Bao Zhiming and Han Wei. China Hammers out Tougher Subsidy Plan for Electric Vehicles. Caixin News Online. Web. 30 September. 2016.

Sustainable Transport In China. New Policy on Electric Buses Published in China. Web.

Bloomberg News. 95% of China’s Electric Vehicle Startups Face Wipeout. Web. 28 August. 2016.

 

Chinese Billionaires Are Taking Over L.A.

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In the last five years there has been a measurable increase in the amount of wealthy Chinese that have immigrated to the United States. The instability of the Chinese currency and increase in government regulation has caused some of the wealthiest Chinese citizens to worry about the fate of their fortunes. Therefore, since money is not a problem for many of these individuals, a large number of Chinese invest in American real estate to ensure that their money will be protected under the more stable U.S. dollar. Chinese immigrants have been settling all over United States; however, California is the clear winner when it comes to who has the highest number of wealthy Chinese immigrants. As a Pasadena native, I have been able to see the increasing number of Chinese immigrants in surrounding cities, which is why I will be discussing the growing Asian population in Arcadia, CA.

China is known for being the country with the largest population, being a global leader in trade, production and manufacturing, and housing hundreds of billion-dollar companies that directly compete with, and often dominate, international markets. So why have 2/3 of China’s millionaires emigrated or have plans to move to the U.S. in the next 5 years (Weise, 2014)?

One reason is because of the increased amount of government regulation in China. In recent years, the Chinese government has started to crack down on corrupt Chinese business practices. Knowing this, many wealthy Chinese citizens who earned their fortunes illegally have been trying to hide their money in foreign assets and investments, so they do not get caught.

According to Christopher Hawthorne from the Los Angeles Times, questionable business practices in China are motivating people to move to the U.S. [which, includes] stashing their money overseas and in mansions and other assets. This creates a problem for the Chinese government because with so many citizens moving large amounts of cash overseas, at a rapid pace, the government is not able to keep track of where all of the money is going.screen-shot-2016-10-11-at-4-10-51-pm

Another reason why many Chinese elites are investing their money in American assets is because China’s currency is relatively weak compared to the dollar. In the beginning of the year, the dollar was not as strong as it usually is, which gave China the opportunity to try and stabilize the yuan (Wei, 2016). However, Lingling Wei from the Wall Street Journal reported that in April of this 2016, the yuan actually depreciated 0.6% against the dollar, causing the Chinese government, along with wealthy Chinese citizens, to panic. These feelings of panic have been occurring for years, causing wealthy Chinese businesspersons to think about where they can move their money to make sure that it retains its value.

Their solution: investing their millions into real estate in the U.S. Karen Weise, a reporter from Bloomberg, found that Chinese nationals hold around $660 billion in personal wealth offshore, with $22 billion of that being spent on homes. For the past 10 years, real estate has catered to wealthy Chinese populations all over the country, with the most concentrated example being in Arcadia, CA.

Arcadia is a city 20 miles northeast of Downtown Los Angeles that has become a haven for wealthy Chinese residents. Residents are attracted to Arcadia because of its first-class schooling, nice neighborhood, large homes, lenient building codes, and a pre-existing Asian population. As a result to an influx of Chinese millionaires, Arcadia has become a city categorized by new mansions that cost anywhere from $2 million to $7 million. You would think these ridiculous asking prices would discourage Chinese citizens from emigrating. However, it has done the complete opposite.

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Just in 2013, one realtor, Peggy Fong Chen, sold over $71 million worth of homes in Arcadia (The Chinese Beverly Hills, 2014). For the most part, these large Arcadian mansions are in high demand because it gives millionaires a place to store their money. Because of China’s shifting real estate policies and the social instability caused by income and wealth inequality in China, rich people have come to feel unsafe, said reporter Jue Wang (2014). For this reason, these Chinese immigrants often pay for their million dollar homes in cash in order to shorten the money trail, with the hopes of hiding their money more effectively from the Chinese government.

When driving through the streets of Arcadia, you are able to large mansions with semi-circular driveways, lined with Range Rovers and Porches. However, when examining the houses closely many seem like they are unoccupied. A member of Arcadia’s homeowner’s association estimated that 20% of these new homes sit empty (Weise, 2014). The main reasoning behind this is that the Chinese are just using these homes to store cash. However, other reasons can be because the mansions are being used as vacation homes, or because many homes are purchased for millionaire’s children, parents, or mistresses, or because language barriers have actually caused Chinese residents to move back to Asia or elsewhere.

The fact that Chinese immigrants are leaving Arcadia because of a language barrier proves that, certain cities and amenities do not appeal to all Chinese elites. However, people are highly aware of the potential profits these immigrants could generate. Therefore, people have had to come up with specific ways to attract wealthy Chinese immigrants.

To attract this specific Chinese market, architects and developers have been building and crafting million-dollar mansions with similar styles, which has drastically changed Arcadia’s city landscape. Most of the homes architects create reflect the Chinese philosophy of feng shui and face the south, which are two important aspects of Chinese culture (Hawthorne, 2014). Chinese culture is deeply rooted in tradition, therefore, Chinese citizens are often more attracted to homes that represent and honor their culture. Arcadian architects also try to attract Chinese millionaires by creating mansions that include: wine cellars, theaters, double-height entry halls, elevators, many master bedrooms, and a separate wok kitchen (Hawthorne, 2014). Architects and developers make a conscious effort to build these Arcadia mansions to appeal to wealthy Chinese immigrants, in the hopes of earning a large profit.

Architects and developers are not the only ones trying to bring Chinese millionaires to America. The U.S. government recognizes the money that wealthy foreigners have, and wants them to spend it on American soil. Therefore, in 1990 the U.S. government created a program to attract foreign investments, in the hopes of sparking investment. It requires that if wealthy foreigners invest at least $500,000 in an American business, they are eligible to apply for a green card known as the EB-5 Visa. As of this year, Chinese nationals allocated 85% of the 10,000 visas offered. Therefore, through this plan, the U.S. was able to generate $4,250,000,000 in investments; in addition to the money foreigners spent once they came to the U.S.

The influx of wealthy Chinese immigrants has brought a lot of business, investment, and money to the United States. For example, in 2014, Arcadia brought in a record revenue of $7.9 million just from fees for building permits and developments, which is a 72% increase from the previous year (Weise, 2014). Wealthy Chinese immigrants also helped with the U.S. economy during the recession of 2009. During this time, China elites were slightly affected but still stayed wealthy. Therefore, as America was facing a time of dramatic economic downturn, Chinese millionaires continued to move to the U.S., bringing millions of dollars with them. This money was then used to hire workers, pay for goods and services, and to help keep businesses afloat.

As much as this influx of wealthy Chinese immigrants can be beneficial it can also create problems in society. One problem is with long-term residents who feel like their cities are being commercialized solely for the purpose of financial gain. For example, people that have grown up in Arcadia have watched their hometown turn into a “Chinese Beverly Hill” with mansions that are not even occupied. As of 2010, it was reported that than 44% of Arcadia’s residents were Chinese (Bertrand, 2015). This report just shows how the Chinese population is starting to take over cities, which could further upset city natives. Therefore, it is evident that the thousands of wealthy Chinese immigrants that have settled in the U.S. have disrupted cities by attracting commercial development and expunging any remnants of a city’s history.

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Another potential problem that should be considered is that the growth that Arcadia is experiencing is not normal. The building of mansions has grown at a rate that does not seem to be sustainable. Therefore, we want to be conscious about how much money we are pouring into these projects, so that we can avoid any real estate bubbles in the future. If we continue building mansions we will either run out of resources or run out of buyers. Therefore, we must make a cautious effort to focus on only creating supply when there is demand.

As you can see, there are pros and cons surrounding the immigration of Chinese millionaires. Regardless, it is important to recognize the impact they have on the U.S. economy and society, in the hopes of finding a harmonious balance between the two. Immigration is a great way to encourage diversity and change; however, we do not want to promote too much diversity in a way that will drive out the people who inhabited an area first. Therefore, this balance is essential to creating a world where everyone can prosper

Works Cited:

Bertrand, Natasha. “This California Suburb Has Become a Haven for Wealthy Chinese

Residents.” Business Insider. Business Insider, Inc, 02 Feb. 2015. Web. 6 Oct. 2016.

Hawthorne, Christopher. “How Arcadia Is Remarking Itself As A Magnet for Chinese Money.”

Los Angeles Times. Los Angeles Times, 3 Dec. 2014. Web. 9 Oct. 2016.

VocativVideo. “The California Town Where Chinese Millionaires House Their Kids-and

Mistresses.” YouTube. YouTube, 05 Dec. 2014. Web. 2 Oct. 2016.

Wang, Jue. “Chinese Homebuyers Heat up LA’s Real Estate Market.” US-China Today. 4 Apr.

  1. Web. 10 Oct. 2016.

Wei, Lingling. “China Challenged to Keep Yuan Stable as Dollar Rises.” WSJ. Wsj.com, 16 May

  1. Web. 10 Oct. 2016.

Weise, Karen. “Why Are Chinese Millionaires Buying Mansions in an L.A. Suburb?”

Bloomberg.com. Bloomberg, 14 Oct. 2015. Web. 11 Oct. 2016.

Runaway Production & Film Incentive Programs

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Runaway production is when film and television productions are filmed and produced outside of the U.S. or outside of Los Angeles. Productions are being lured in all directions to leave Hollywood due to film tax incentive programs. It is estimated the California lost over $9.8 billion dollars due to runaway production before crafting their own film tax incentive programs. The original California Film & Television Tax Credit Program that was passed in 2009 to be effective from 2011 to 2014 was a $100 million-per-year incentive plan. The program included a 20% tax credit for feature films and new television series and  independent film. This plan had a cap of $50 million for the films. The eligible films to receive the tax credits were chosen through a lottery system. This program is administered by State Film Commission called the California Film Commission (CFC). Their responsibility is to attract and retain motion picture production in California.

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After the first program was made, filming in the LA region bounced back. According to the CFC, 229 projects were completed during the first film tax credit program and these projects received $447 million worth of tax credits. These projects went towards the total production spending in California that went up to $3.7 billion during that time period. The total, including the incomplete projects that received tax credits during the program, was that the $800 million tax credits under the program could be partly responsible for the $6.1 billion production spending in California between 2011 and 2014. But, it is estimated that about a third of the projects that received tax credits from the first program would have been made in California either way. This is what makes this program unclear of whether it was actually worth the money.

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(Change thought to be from the original program)

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This whole concept of California having a film tax incentive program stemmed from having to keep up with other states that created these programs first. Starting in the early 2000s states such as New Mexico, Georgia, New York, Louisiana and North Carolina started making film tax incentives. These states created these programs in hopes to start a new industry in their state to create new jobs and in turn boost their state’s economy.

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Georgia’s first tax incentive program was introduced in 2002. The state’s second and most progressive tax incentive, the Georgia Entertainment Industry Investment Act began in May 2005 and was later updated in May 2008. Their program has a 30% tax credit for films. The amount of tax credits Georgia has included in their programs has grown from $10.3 in their original Act to $504 million currently.

Another state that had a program early on was Louisiana. They enacted the Louisiana Motion Picture Tax Incentive Act in July of 2002. Their program included the the Investor Tax Credit of 30% for films with no cap and the Labor Tax Credit of 5% credit for payroll expenditures on Louisiana residents. From these aspects, this stimulated filming in the state and employment of their own residents.

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As these states continued to tweak their programs, California wanted to tweak their original program as well. Hollywood wanted to pass a new incentive plan that included more money for films but it was difficult to show tax payers that the initial plan was worth the money in the first place and now it is even more difficult because the amount they wanted to include increased a lot. In order to evaluate the economic effects of a film tax credit program it is important to separate the new spending resulting from it and the spending that would have happened regardless of the credit program existed. In efforts to separate these and give tax credits to the projects that they actually need to target, their new incentive plan was tailored further. This plan further specified which project would get the tax credits in order for it to be more reasonable and effective in reaching its goal. The goal of the new program, the California Film & Television Tax Credit Program 2.0, is to keep the productions that are currently filming in California there and for new productions to choose to film in California. Another hope is for these financial incentives to make California competitive enough amongst other states and countries to show executives the benefits of filming in the L.A. region because of the access to experienced crews and the element of being close to their L.A. homes since the business is run out of Hollywood.

The program is a $330 million-per-year incentive plan which started in 2015 after being passed ultimately in August 2014.  

Some new features of the plan varying from the original:

-The length of the program is now a longer period of 5 years

-It expanded eligibility to films with larger budgets (over $75 million), TV pilots and 1 hour TV series

-It has a new ranking system for selection based on jobs and other criteria instead of the original lottery which could select any project randomly (this is a focus on job creation)

-Projects being filmed 30 miles outside of the Hollywood area would get a 5% boost to keep them in-state (this is targeted towards visual effects and sound studios in the Bay Area)

-It caps the amount of a movie’s budget that can earn tax credits at $100 million

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From this program, the hope is also for these financial incentives to make California competitive enough amongst other states and countries to draw executives to see the benefits in filming in the L.A. region because of the access to experienced crews and the element of being close to their L.A. homes since the business is run out of Hollywood.

According to FilmLA, since the 2.0 program was enacted overall filming in L.A. went up by 11.4% in the first quarter of 2016 in comparison to the first quarter of 2015 when the new program began. They reported that L.A. had a total of 9,703 shooting days since it was enacted and the total shooting days in all of 2015 was 8,707 days. The peak was in 1996 with 14,000 shooting days (this can be a goal to hopefully get back to). The local unions in Los Angeles have reported that they have reached capacity employment as well according to FilmLA.

But, California’s program has very tough competition currently. Georgia has recently developed its own $2 billion film industry, which has led to the start of being coined as “Y’allywood”, or the Hollywood of the South. Georgia is ranked third in the U.S. for film production now and it is the fifth in the world. This can largely be due to the Georgia Entertainment Industry Investment Act which was most recently modified in 2008. From this Act, Georgia gives a 20% tax credit to any film that spends $500,000 or more there during production and 10% tax credit supply for including the state logo in the film’s credits. So Georgia gives a total of 30% in tax credits. This is just the baseline for those films starting at $500,000, a big difference in comparison to California’s plan. Other factors working for Georgia right now include its international airport, the biodiversity in their land for shooting and many new sound stages that have been built.

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(filmed in Georgia recently)

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But, Georgia’s goal varies from California’s. Georgia hopes to make film a new industry in their state. This plan’s ultimate goal from the tax credits is to eventually attract enough companies and productions that will stay in Georgia long-term, instead of being in California or other competing states.

(California Film & Television Tax Credit Program 2.0. – made to counter-act the outcomes shown in the graphic above)

(California Film & Television Tax Credit Program 2.0. – made to counter-act the outcomes shown in the graphic above)

And it seems to be working so far. Ledger Enquirer newspaper states that, ” The state’s estimated $53 million tax credit for 2013 added over $6 billion to Georgia’s economic activity, with a growth rate of 55 percent. That’s quite a return on investment”. But the growth in Georgia could be seen as too much, because the film industry is growing so fast that there is a shortage of crew members for the productions. Local universities are adjusting their curriculum to prepare more workers for production jobs in the state, according to AJC Newspaper.

It is hard for California’s program to compete with theirs because they do not cap, more money is allocated to the program and it spans a longer period of time.

A drawback of the results so far from California’s 2.0 program is that even though there are more films being shot in California again, it is not the large ones. This is because of the cap. So these films still seek out the states or countries that do not cap their tax credit programs.

The tax credits included in the program are able to create below-the-line jobs (which are jobs such as lighting technicians, drivers, location managers etc.). The program doesn’t consider the expenditures on the talent which is a big part of a film’s budget (lead actors, directors and producers). The CEO of Independent Studio Services, Greg Bilson, stresses the importance of the consideration of “above-the-line” costs in tax incentive programs, “On an average $100 million film, 80 percent of that is above-the-line. That number will change depending on who’s in it, but even if it’s just 50 percent of the film, if the incentive doesn’t apply to half of a $100 million film, the California incentive compared to other incentives out-of-state and out-of-country is effectively half or less”. This is a contributing factor to why California’s program isn’t keeping large films in the state, the program doesn’t account for a huge portion of the budgets for those films. The high prices for permits, processing and fire department reviews in order to film on location in California are also inconvenient for production and can lead production to go elsewhere.

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According to the film industry trade publications such as The Hollywood Reporter, Deadline Hollywood and The Wrap, many states are decreasing the amount of tax credits in their programs. In my opinion, as other states drawback their own incentive programs, California should too. This is because California’s purpose of creating their program wasn’t to create a new industry in the state, like these states’ intention. Its purpose was to compete with the other states’ incentive offers, so if they are bringing down the level of the playing field, California should bring down their incentive program to that level.

Also, I believe that one of the ways to make California’s plan the most effective is if they gave producers something they can rely on for the future. With the plan only spanning over five years, the tax credit situation in California isn’t very dependable for a producer. Now, large productions can take a very long time to make and films can be in development for years while they are in the decision making process of where to film. If the program was over a longer term more companies would also want to invest in the film industry in California specifically and not elsewhere. Because digital media and streaming services have also started to take-off, possibly credits to keep them in California being added on-to the program could be a good idea for preventative measures so they do not leave in the future.

After the results and assessment of the 2.0 I do not think that the same program will be re-approved. I think that a new, scaled-down program involving less money will be made or the 2.0 will gain additions such as tax credits for digital and a longer time period. But, it is difficult to tell now what moves will be made with the effectiveness of the 2.0 being uncertain.

Works Cited

“Are Film Tax Credits Cost Effective?” The Los Angeles Times. N.p., n.d. Web.

By Julia Wick in Arts & Entertainment on Apr 19, 2016 10:37 Am. “Film Production In L.A. On The Rebound Thanks To Tax Credit.” LAist. N.p., n.d. Web. 11 Oct. 2016.

“California Analysts Office Report.” N.p., n.d. Web.

“California and Runaway Production.” Variety. N.p., n.d. Web.
“Costs and Benefits of Film Taxes.” Business Journals. N.p., n.d. Web. 11 Oct. 2016.

“Georgia’s New Hollywood.” Movie Pilot. N.p., n.d. Web.

“Irresistible Film Tax Credits.” Oz Magazine. N.p., n.d. Web.

Johnson, Ted. “Producers Say High Fees at L.A. County Parks Are Hurting Location Filming.” Variety. N.p., 22 Oct. 2014. Web. 11 Oct. 2016.

Lodderhose, Diana. “Runaways Welcome: Countries Offer Incentives to Lure Productions Fleeing Hollywood.” Variety. N.p., 29 Aug. 2013. Web. 11 Oct. 2016.

Michael Thom. “Fade to Black? Exploring Policy Enactment and Termination Through the Rise and Fall of State Tax Incentives for the Motion Picture Industry.” N.p., n.d. Web.

Michael Thom. “Lights, Camera, but No Action? Tax and Economic Development Lessons From State Motion Picture Incentive Programs.” Sage Journals. N.p., n.d. Web.

Paul Caron. “Starstruck States Squander $10 Billion In Film Tax Incentives Producing Minimal Economic Returns.” Tax Prof. N.p., n.d. Web.

“Runaway Production.” Wikipedia. Wikimedia Foundation, n.d. Web. 11 Oct. 2016.

Strauss, Bob. “California Film Incentives Take Spotlight, but Blockbusters Need Greenlight.” California Film IncentivesTake Spotlight, but Blockbusters Need Greenlight. N.p., 06 Aug. 2016. Web. 11 Oct. 2016.

Center, California, and July 2010. Film Flight: Lost Production and Its Economic Impact on California (n.d.): n. pag. Web.

Hall, Gina. “Why Is California Tripling Film and TV Tax Credits While Other States Slash Them?” TheWrap. N.p., 28 Aug. 2014. Web. 04 Nov. 2016.

Office, Legislative Analyst’s. California’s First Film Tax Credit Program (n.d.): n. pag. Web.

 

 

 

 

 

 

 

 

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Brexit and Breadwinners: What leaving the EU means for the future of the UK workforce.

Behind the Vote

 Brexit. A coined term that filled Newsrooms, Facebook feeds, and local pubs all summer long.

Having joined the European Economic Community in 1973, the UK decision to revoke that membership on June 23rd sent shockwaves around the world, as countries questioned what the implications would be for their own economic relations and the European community at large. With ‘Leave’ capturing the vote by only 52% to 48%, the decision was highly controversial and has continued to cause market anxiety in the months since.

The unknown implications of Brexit on the workforce was a key issue heading into the vote, as many economists argued that a decision to leave would trigger an economic reversal in the UK. This meant that if the UK were to ban EU migrants from working in the UK then it could potentially create more employment opportunities for nationals.

With EU workers accounting for 6.6% of the workforce, the referendum drove voters to ask serious questions about long term job security and availability. Would Brexit make it easier for young people to find jobs in the UK? Would wages increase as the result of a decreased supply of labor? What would happen to those jobs of migrants forced to leave? Where will the UK stand in terms of the international workplace?

Some economists predicted that in the short term, organizations would choose to either transition their operations overseas or put a hold on hiring new employees until there was more economic certainty. Both scenarios would decrease labor demand, which could have an impact on overall employment levels.

However, it was and continues to be extremely difficult for economists to predict the outcome of the decision, as UK was the first nation to leave the EU and therefore was no precedent to compare it to. Similarly, if the UK had decided to ‘remain’, its trade and economic relationships with other EU countries could have been severely damaged due a lack of trust and increased tension.

In speaking about this uncertainty, Jurga McCluskey, head of UK immigration at Deloitte said, “Nobody really understands the complexity of leaving the EU because no one has ever left the club… If we leave, the landscape for immigration will change significantly — it won’t be so much what we do but who we chose to work with. Who will those migrants be?”

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Immigrants and Employment Skill Levels

According to research by Oxford University’s Migration Observatory, as of June 2016, there were 2.2 million EU workers in the UK composing for 6.6% of the total workforce. Of that number, 10% were employed in the manufacturing sector and 8% were in retail, hotels and restaurants. Due to the fact that the UK relies heavily on EU workers to fill low-skilled roles, the vote has insinuated anxiety for both employers and employees across various industries.

The Oxford research also found that prior to the vote, three-quarters of EU citizens working in the UK would not meet visa requirements for non-EU overseas workers. As shown in the chart below, low-level jobs were not the only ones at risk, with EU workers in the banking and finance sector showing projected ineligibility levels of 65-70%.

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This is significant because once law makers clearly define what the immigration policy will be, it will affirm the governments “vision” for the post-Brexit economy.

But do UK nationals really want those jobs?

While many argue that that Brexit will supply a large number of low-level jobs for UK nationals, we must also consider whether or not people are actually going to be willing to take them?

In a conversation with Amy Smith, a student at the University of Sheffield, she expressed her concern saying:

‘Having grown up in Germany I witnessed the benefits of immigration first-hand. Immigration is important for the job market – especially since Germany’s demographic structure shows a larger aging population. Because of this, Germany doesn’t have enough young people to fill all of the positions which are becoming available as more and more of the last generation retire. Immigrants are vital for filling the low level positions German natives are less willing to take. I think the UK needs to recognize that the same implications can and will happen here.’

This issue was further discussed by economist Jonathan Porte who described the demand for immigrant’s jobs as not being just a zero-sum game. In an article published by the Guardian he explained, “it’s true that, if an immigrant takes a job, then a British worker can’t take that job – but it doesn’t mean he or she won’t find another one that may have been created, directly or indirectly, as a result of immigration.”

This ties back to the idea that if the demand for certain jobs never existed, will the Brexit decision really change that?

 Current State of the Workforce

 It has been three months since the June 23rd vote, and economic numbers are showing more promise than expected. Although there was widespread fear that a decision to leave the EU would cause widespread job losses, economic data following Brexit is saying the opposite.

According to an August 2016 report by Telegraph, the post-Brexit economy saw a decrease in unemployment, an increase in consumer spending, and a government budget surplus. In July, the UK unemployment rate was at 4.9%, its lowest rate since 2005, and this number has remained unchanged according to August and September data.

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So with these economic forces showing positive signs for the UK, does this mean that the workforce still has to worry?

Maybe not so fast.

While UK employment continues to rise, the country has seen a sharp rise in inflation which poses a major threat to job levels and wages. An August report showed that the UK’s CPI rose to 0.6% which was higher than expected, being up from 0.5% in June.

The Office of National Statistics spoke on this issue saying, “while there was no sign of the plunge in the value of the pound having an impact on CPI, the producer prices index (PPI) show that sterling’s slump had pushed up the cost of imports for British manufacturers, which could fuel inflation down the line.”

An increase in inflation could potentially affect the UK’s employment rate going forward, as the uncertainty of market can lead to lower investment and lower economic growth in the workforce. Furthermore, inflation can also trigger a lower export demand which could cause unemployment in various trading sectors.

 Due to the fact that the official removal of the United Kingdom from the European Union may not happen for some time, economic uncertainties will continue to dictate discussion among economics and politicians alike.

Until Parliament makes an official decision on Brexit’s terms, workers and immigrants across the UK must patiently wait… and hope that the decision to leave didn’t take their jobs with them.

 

 Sources: 

https://www.ft.com/content/953671ba-b784-37f6-8f29-45402e846d50

https://www.theguardian.com/business/2016/aug/17/uk-unemployment-claimant-count-falls-after-brexit

http://www.telegraph.co.uk/business/2016/08/19/what-brexit-apocalypse-no-sign-of-economic-woe-after-the-referen/

http://www.independent.co.uk/news/business/news/brexit-uk-economy-eu-referendum-result-jobs-employers-hiring-a7191381.html

https://www.ft.com/content/3d0de756-1764-11e6-b197-a4af20d5575e

http://www.independent.co.uk/news/uk/politics/points-based-immigration-system-theresa-may-explained-brexit-referendum-australia-a7227001.html

How does Supply and Demand affect the Change in Oil Prices?

The introduction of technology through a variety of platforms has greatly affected a number of different industries, including automobiles and oil production. Technology has changed the automobile industry through the introduction of electric vehicles (EV) and modernization of fracking practices. According to an article in BBC News, “Fracking is the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside”. In correlation with increased technology and automobiles, is the concern over oil prices for the general public and corporations. Although oil prices are impacted by many things, from technology such as fracking, to war and peace in conflicting regions, the main contributor is the battle over changes in supply and demand.

Significant economic events will also impact the amount of oil consumption. For example, Iran’s re-emergence into the world’s top oil producers will help to increase supply, which could eventually surpass demand. When supply is greater than demand, prices of oil will decrease so that people will be attracted to buy more gasoline at that moment. This will also be used as a tactic during times of economic turmoil, when the general public does not have the funds to spend money on gas. During the Financial Crisis of 2008, people were so worried about the outcomes of their financial inve150710-us-petroleum-consumption-voxeu-chartstments that they saved all the extra money they had for necessities. People decided to make the switch from driving their own cars to using public transit as a means to save money. As seen in Figure 1, the
re was a decline in US petroleum consumption between the years of 1949 to 2014 after each war and econ
omic crisis. The average price per gallon of gasoline in the United States fell from $4.08 in June 2008 to $1.61 in December 2008. A shortage of demand for the supply that was available, created a surplus in gasoline and the need for a reduction in prices. As a result, there is a direct correlation between world economic events and supply and demand of oil, leading for a change in prices.

Over the last several years, United States production of oil has nearly doubled. This has lead to more competition, forcing Middle Eastern exporters to find new areas to sell to. Although Russia has constantly been through economic issues, it continues to hold its rank as the number one oil producer. The current price of crude oil hovers around $51.18 per barrel according to Reuters. In comparison, a barrel used to sell at above $100 at the midpoint of 2014. It is believed that this is a result of large oil companies reducing investments in new technology and exploration for new oil. According to a research report produced by RBC Capital Markets, “projects capable of producing more than a half-million barrels of oil a day were canceled, delayed or shelved by OPEC countries alone last year, and this year promises more of the same.” To reiterate the question that people ask of what drives a change in oil prices, it is a result of supply and demand, but as a result of competition. Companies are pulling out of new opportunities to find oil because the costs outweigh the benefits. In the past, drilling for oil created a cash cow that families like the Rockefeller’s were able to establish untouchable fortunes as a result. Surging United States’ production of oil has created cheaper prices for Americans due to cheaper transportation and importation costs and the ability to export oil to other countries. With increased competition among corporations and on a global level between countries, the supply for oil is increasing at a rate that demand is unable to keep up with.

The introduction of electric vehicles has increased competition among the automobile industry. EV sales are increasing month-to-month in comparison to the same month during the previous year. However, this is not enough to keep up with total vehicles sales. The introduction of electric car dealerships, such as Elon Musk’s Tesla, has created a new target market for those who want to drive environmentally friendly vehicles. Total vehicle sales have increased from 2009 to 2016 by about 74.5%. September U.S. auto sales reported strongly at 17.8 million vehicles. Total electric vehicle sales during the month of September was reported at just below 17,000 units. The previous numbers are important to refute rumors that an increase in electric vehicles on the road will lead to a decline in oil prices. Ryan Lance, CEO of ConocoPhillips, stated that EVs “won’t have a material impact for another 50 years”. Yes, there is major growth in the industry and an increase in population of people who are looking to buy plug-in vehicles, but there is not enough competition to all-gasoline cars to disrupt oil production.

The Organization of the Petroleum Exporting Countries, also known as OPEC, plays an important role in determining the supply and production of gas. The oil minister of Saudi Arabia, Ali al-Naimi, is determined to keep oil production consistent in 2014. OPEC has the power to decide to cut production as a means to increase prices and revenue. Mr. al-Naimi firmly believes that keeping oil prices where they were would help to stimulate global economic growth. To show the rarity of reducing production, back in September, members of the organization agreed to cut production for the first time in over eight years. Fast forward to today, Russia’s Vladimir Putin showed support for OPEC’s proposal to “freeze oil production in order to reverse the slump in global prices”. He stated that oil prices have decreased by more than 50% in two years due to surplus production. Not only would freezing oil production raise the low prices of oil, it will also help to prevent price fluctuations in the future. Putin is in favor of freezing production, or reducing supply, to raise prices so that Russia can remain the dominant power of the oil industry. Currently, oil and gas make up 70% of the entire country’s export incomes, resulting in a decrease of about $2 billion for every dollar that oil prices fall. The organization is aiming to cut about 700,000 barrels per day at its next meeting on November 30, 2016 in Vienna, Austria. Many nations fail to reach agreements at these meetings because they are greedy or are involved in political battles with one another. For example, the proxy war between Iran and Saudi Arabia, two of the world’s largest producers of crude oil, has created tensions that would force them to refuse agreement in order to prove a point. There is no question over the strength of OPEC and its ability to make a decision that could either raise or cut the price of oil. However, as mentioned previously, the simple issue over whether prices will be increased or decreased comes down to worldwide supply and demand.

There is not a single, clear-cut answer to determine what the main force behind the change in oil prices are; however, we can correlate the change to surpluses and deficits in supply and demand. Economic events, such as the Iranian Revolution in 1979 and the Financial Crisis in 2008, were main contributors to changes in supply and demand for oil. The revolution created an oil shock throughout the United States, when oil exports were severely cut from Iran, decreasing supply. The economic crisis in the U.S. affected the other end of the spectrum, leading to a decrease in demand from oil consumers throughout the nation. Competition amongst oil producers around the globe has increased significantly over the last decade, forcing companies to slash prices in order to attract buyers for an excess supply. Lastly, OPEC, the dominant oil production coalition, has the most control over the oil industry and the ability to make decisions regarding prices and production. Talks about freezing production are lingering throughout Europe, specifically Russia, with hopes to reduce the supply and increase prices. Overall, each example provided refers back to the simple economic principles of supply and demand. When supply is greater than demand, prices go down; and, when demand is greater than supply, prices go up. Oil consumption and production are resulting forces of supply and demand.

 

Works Consulted

BBC News. “Opec Oil Output Will Not Be Cut Even If Price Hits $20.” BBC News. N.p., 23 Dec. 2014. Web. 10 Oct. 2016.

Cox, Lydia. “The Surprising Decline in US Petroleum Consumption.” World Economic Forum. N.p., 10 July 2015. Web. 10 Oct. 2016.

EIA. “U.S. Natural Gas Total Consumption (Million Cubic Feet).” U.S. Energy Information Administration. N.p., 30 Sept. 2016. Web. 11 Oct. 2016.

Krauss, Clifford. “Oil Prices: What’s Behind the Volatility? Simple Economics.” The New York Times – Energy & Environment. The New York Times, 29 Sept. 2016. Web. 11 Oct. 2016.

Reuters. “Auto Sales Down in September Even After Bigger Dealer Discounts.” Fortune – Auto. N.p., 3 Oct. 2016. Web. 9 Oct. 2016.

US Energy Information Administration. “World’s Top Oil Producers.” CNNMoney. Cable News Network, 22 July 2016. Web. 10 Oct. 2016.

Wise, Alana. “A Legendary Investor Thinks Electric Cars Will Raise the Price of Oil.” A Legendary Investor Thinks Electric Cars Will Raise the Price of Oil. N.p., 25 Sept. 2016. Web. 27 Sept. 2016.

Wanda’s Hollywood Ambition

Wang Jianlin, the richest man in Asia, is trying to change the balance of power in the global entertainment business. As the head and the founder of the largest Chinese commercial property company Dalian Wanda Group, Wang has made decisions to spend billions to buy his way in Hollywood. After the company became the world’s largest cinema chain operator in 2015, it announced several other acquisition and partnership with major Hollywood Studios. While facing critics and doubts, the company is not hiding its ambition to become a global entertainment colossus.

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Both Wanda and Hollywood are facing opportunities and concerns. To Wanda, it is shifting focus from property development to entertainment, hoping to start a new chapter of its business legend. Since 2012, Wanda has spent more than $10 billions to invest in everywhere from worldwide theater chains to Hollywood studios. But it takes time to define whether these are financially smart decisions. To Hollywood studios, having Wanda and other Chinese investments backing their projects means they have capitol to make the film they want to make; more importantly, they have access to the restricted Chinese film market. But at the same time, it raises concerns that Chinese might start to have too much influence over Hollywood.

According to Forbes, the 61-year-old Chinese businessman Wang Jianlin has a net worth of $32.8 billion as of November 2016, and his company’s assets amounted to over $90 billion. Before it made its moves on Hollywood, Wanda Group primarily focused on its commercial properties. Founded in Dalian, China in 1988, Wanda first started as a residential property company. To date, Wanda has established 160 commercial shopping malls throughout China.

Starting 2012, the company decided to shift gear to entertainment. Wanda Cultural Industry Group, founded in 2012 and became one of the company’s main focuses, has already become the largest entertainment company in China. Prior to the cultural group, Wanda established its film division, Wanda Media in 2010, which has already become the largest private Chinese film production company. It seems like the company has an obsession of becoming “the largest” or “the best,” and yes, the cultural group aims to become one of the top five entertainment companies in the world by 2020.

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This is an aggressive ambition. In hope to make it happen, Wanda followed up with a serious of direct investments, starting with its acquisition of AMC in 2012.

In September 2012, a byline started to appear underneath every AMC logo: A Wanda Group Company. Wanda spent $2.6 billion on this acquisition. AMC was the second largest movie theater chain in the United States at the time, and has over 5,000 thousand commercial movie screens in the U.S., out of a total of 40,759, and the acquisition has made Wanda the largest cinema operator in the world. However, prior to the purchase, theater operators in the U.S. were facing big challenge from low attendance rate. According to New York Times, attendance in North America 2011 fell to $1.28 billion, which is the lowest since 1995. At that time, it was unclear what caused the downfall, but theater certainly didn’t seem like the best investment that would earn Wanda much quick money.

Is it really a good deal for Wanda to buy AMC? At least Wang Jianlin thinks it is.

“It doesn’t matter how much money we make,” Wang was quoted in a Forbes interview. Perhaps rather than getting instant return, his vision is more towards making Wanda a globally known brand. In fact, the act of purchasing AMC had gotten Wanda and himself immediate public exposure. All of the sudden, Western media are writing about a Chinese entertainment company. From a public relation point of view, this is a long-term investment that comes with “free” advertisement.

(120905) -- LOS ANGELES, Sept. 5, 2012 (Xinhua) -- Chairman and President Wang Jianlin (R) of China's Dalian Wanda Group Co. and AMC chief executive officer and president Gerry Lopez attend a press conference at an AMC theater in west Los Angeles, the United States, on Sept. 4, 2012. China's leading private conglomerate Dalian Wanda Group Co. on Tuesday completed a high-profile acquisition of AMC Entertainment Holdings, Inc., valued at roughly 2.6 billion U.S. dollars, in Los Angeles. (Xinhua/Zhao Hanrong) (nxl)

Moving on to 2015, Wanda spent another $3.5 billion on Legendary Entertainment, one of the biggest filmmaking studios in Hollywood. In the past, Legendary had co-produced many well-known movies including “Jurassic World” and “Interstellar.” Some of its productions are more popular in China than in the U.S., such as “Godzilla” and “Warcraft.” The company’s future productions will likely include more Chinese elements and characters not only because it is now owned by a Chinese company, but also because of the access of the huge Chinese market. The number of movie screens in China has been increasing dramatically since 2009. As of 2015, China has 31,882 screens, which is more than triple to the number in 2011.

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Legendary’s upcoming production, “The Great Wall” will release in February 2017. Directed by Chinese director Yimou Zhang and starring Matt Damon, the movie will be distributed by Universal Pictures and two other Chinese distribution companies. This is a giant Hollywood production produced by a Chinese production company – although it wasn’t Chinese until last year.

Just two months after acquiring Legendary, Wanda paid $1.1 billion in cash to settle a deal with Carmike Cinemas, adding 2,954 screens to the AMC family, making it the largest theater chain in the world. The stock prices for both Carmike and AMC raised a little bit right after the purchase, signaling a good start for the merger.

Soon after the deal with Carmike, Wanda tried to make a deal for Paramount. Earlier this year, Paramount was looking for a party to buy 49 percent stake of the studio. Wanda was interested in making about $1 billion equity investment. However, after months of talking, Viacom abandoned the plan to sell in September. In response, Wanda almost immediately announced a partnership with Sony. The exact size of this negotiation was not released, but it is likely to be a smaller investment that won’t give Wanda a lot of initiatives on Sony’s strategic decisions. The company will now provide 10% to 15% in co-financing on some of Sony’s films, including the upcoming production “Passengers.” It will also be Sony’s strongest support on film distribution and marketing in China.

As of now, two months after partnering with Sony, Wanda announced another acquisition for Dick Clark Productions, offering about $1 billion. Dick Clark Productions had produced many television shows and awards, including the Golden Globes and “So You Think You Can Dance.” This acquisition marks Wanda entering the world of television production.

The series of intensive movement is causing lawmakers concern. They are worried that the company’s decisions might have been made in favor of the Chinese communist party, which may perform a “foreign propaganda influence over American media.” Traditionally, Chinese’s cultural presence has not been very strong. So the government has made “enhancing China’s soft power” as one of its priorities. The concerns seems logical especially when Wang Jian Lin is a businessman with a communist party background.

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Wang Jianlin explained his business motivation at Wanda’s L.A. Film Summit in October. “Chinese box office revenue has the potential to maintain an annual 15 percent growth for about a decade,” Wang said. By acquiring American companies, he is not only bringing technology and talent back to China, but also opening up the market for the American content. Wang believes his investments will thus be beneficial. And if Hollywood wants a share of this giant market, it needs cooperation with Chinese companies, and it needs to have better understanding in Chinese audience.

Hollywood isn’t the only place Wanda invests in. At the summit, Wang also encouraged Hollywood Filmmakers to come to Wanda’s new movie studio in Qingdao, China. Said to be the largest movie studio in the world, the Qingdao Oriental Movie Metropolis is aiming to rival Hollywood. Situated on a 494-acre site, the studio complex costs Wanda $8.2 billion to build and will open in 2018.

Wanda is not the only one to invest in Hollywood. Other Chinese conglomerates, such as Alibaba and Tencent, have also expressed interest. On Monday, Oct.10, Alibaba announced a partnership between its subsidiary Alibaba Pictures and Steven Spielberg’s Amblin. Earlier, Chinese internet giant Tencent and Hong Kong based information and communication technology company PCCW had also said they would invest $1.5 billion to STX Entertainment.

All those Chinese investments signal greater Chinese influence in Hollywood. However, by far Wanda seems to be the only one determined to enter the game as a main player. All together, Wanda has spent about $10 billion on investment in Hollywood, and certainly is willing to spend more to seal deals with Hollywood giants. Even for a man like Wang Jianlin, that’s still a lot of money. Only one thing can be certain, that the entertainment industry has become one of Wanda’s main strategic focuses. The company said it would become one of the five cultural enterprisers in the world by 2020, and it is keeping up with its ambitious vow.

 

 

Other Reference:

http://www.voachinese.com/a/wanda_purchasing_20120716/1405262.html

http://www.theepochtimes.com/n3/2089188-chinas-hollywood-takeover/?utm_expid=21082672-12.JPI1vw8-RKyYhrWpuuXhuA.0&utm_referrer=https%3A%2F%2Fwww.google.com%2F

Wanda’s Legendary Buy Is Just the Beginning of China’s Investment in Hollywood

http://yuleyingtang.baijia.baidu.com/article/649735

http://www.wsj.com/articles/chinas-dalian-wanda-buys-legendary-entertainment-for-3-5-billion-1452567251