Huayu: Starting from joining the mainstream entertainment industry in 96

Chapter 387, page 385: Transforming into a Dragon Upon Encountering Wind and Cloud
In December 2001, a cold wave swept across China, affecting both the north and south.

But the Chinese film industry, and even the broader cultural and media sector, seemed to have been struck by two red-hot irons, instantly boiling over.

On December 11, China officially signed the legal documents for joining the World Trade Organization (WTO), marking China's integration into the global economic and trade system after a long period of negotiations.

The shockwaves from this historic event are far-reaching, naturally including the promise to further open up the cultural market.

Capital with a keen sense of smell has already caught the alluring scent emanating from that still-blue ocean market with enormous potential.

However, what truly focused capital's attention on the film industry and injected a strong boost into it was Decree No. 342, the "Film Administration Regulations," which was officially promulgated by the State Council on December 25.

This new regulation, which will take effect on February 1, 2002, replaces the old version from 1996 and is regarded as a guiding document for China's film industry to move towards deep marketization and industrialization reform in the context of China's accession to the WTO.

Several key provisions in the new "Film Management Regulations" have caused a stir in the industry, much like a bombshell:

Enterprises, public institutions, other social organizations, and individuals are encouraged to participate in film production through funding or investment.

This provision, for the first time, explicitly and legally encourages non-public capital to enter the film production field, breaking down the original ownership barriers.

The state encourages enterprises, public institutions, other social organizations, and individuals to invest in the construction and renovation of cinemas.

This provides a legal basis and policy support for the ongoing reforms of cinema chains and the wave of cinema construction.

With the approval of the State Council's radio, film and television administration department, film production companies may co-produce films with overseas film producers... This will further regulate and encourage international co-production.

In addition, the regulations have made the film review, distribution and screening processes more market-oriented, with the overall tone of "opening up and invigorating, while strengthening management".

A stone stirred up a thousand waves.

While major media outlets are still extensively interpreting the profound impact of the new regulations on the future of Chinese films, predators in the capital market have already turned their attention to Sheng Ying Media, a private film and television giant that has gradually integrated production, distribution, and cinema chains over the past five years, starting with wedding video recordings and expanding into television, music, artist management, and cultural real estate. It has also just reached a strategic cooperation agreement with New Line Cinema in the United States.

Wang Sheng, a young man who is only 24 years old, has already taken charge of the nascent form of a huge entertainment empire, and Shengying Media, which he founded, has instantly become the most promising "potential stock" and "best target" in the eyes of capital.

If previously, investors harbored doubts about the cultural and media sector, believing it to be fraught with policy risks and lacking a clear profit model, these doubts have been largely dispelled with China's accession to the WTO and the promulgation of the new "Film Management Regulations".

In a huge market with over a billion people, sustained high-speed economic growth, and loosening policy barriers, the explosion of cultural consumption is almost inevitable.

Shengying Media is undoubtedly the fastest-moving, most comprehensively positioned, and most dynamic player in this field.

The concept of "China's first entertainment stock" appeared so clearly and enticingly on the desks of major investment institutions for the first time.

For a time, the phone in the president's secretariat of Shengying Media, located in the Jingxin Building, rang incessantly, almost overwhelmed with calls.

The fax machine, as if it had been given a taste of chewing gum, kept spewing out letters of intent for cooperation and meeting requests from all over the country and even overseas.

The secretariat team led by Li Tingting was caught up in an unprecedentedly busy period.

These numerous invitations to visit, arriving like snowflakes, represent capital forces that can be broadly categorized as follows:
The first category consists of top international investment banks and venture capital firms.

These financial giants, with their keenest sense of opportunity, had long been eyeing the Chinese market. As soon as the news of China's WTO accession was confirmed, they acted swiftly.

Morgan Stanley and Goldman Sachs, two Wall Street giants, sent formal letters almost simultaneously through their representative offices in Hong Kong or recently established in mainland China, expressing their "deep interest in Shengying Media's business model and future development" and hoping to "arrange a high-level meeting to explore potential strategic cooperation in all aspects, including but not limited to private equity financing, pre-IPO guidance, and future overseas listing."

Their intention is clear: to lead the underwriters and push Shengying Media to the international capital market, with a direct target of Nasdaq or the Hong Kong Stock Exchange main board.

IDG Capital and SoftBank Asia: These international venture capital firms, which have long been established in China and have successfully invested in internet companies such as Sohu and Sina, also see a huge opportunity in combining traditional media with emerging markets.

They preferred to make pre-IPO private equity (PE) investments, acquiring initial public offering (IPO) shares and then cashing out for huge returns after the listing. Xiong Xiaoge and others from IDG Capital even attempted to contact Wang Sheng directly through personal connections.

The second category consists of emerging domestic securities firms and capital forces.

With the development of China's capital market, local financial forces have also begun to rise.

China International Capital Corporation Limited (CICC): As a top-tier investment bank in China, CICC, with its strong government background and accurate grasp of domestic policies, has also set its sights on Shengying Media.

They prefer to push Shengying to list on the A-share main board in China, creating "China's first film stock," which has unique advantages in terms of both policy support and brand effect.

Established securities firms such as Southern Securities and Huaxia Securities: Although these institutions may not have as flexible mechanisms as international investment banks, they have strong domestic channels and networks of relationships, and they have also extended olive branches, hoping to get a share of the pie and participate in underwriting or strategic investment.

The third category consists of investment institutions with state-owned assets or strong industrial backgrounds.

Shanghai Industrial (Group) Co., Ltd., Beijing Holdings Group and other window companies: These large groups with both state-owned background and market-oriented operation capabilities have also keenly perceived the opportunities in the cultural industry through their strategic investment departments.

Their investment in Shengying may not be solely driven by financial returns, but also by strategic planning and the acquisition of high-quality cultural resources.

Poly Culture & Arts Co., Ltd. (related to Poly Culture): As a partner that had previously collaborated with Shengying on the "Night at the Museum" project, Poly Culture, being in a close position, directly expressed its desire for a deeper partnership. Whether it's capital increase and share expansion or strategic placement in the future listing process, they hope to have a place in it.

The fourth category is Chinese capital from Hong Kong, Taiwan, and Southeast Asia.

These investors have a natural affinity for the Chinese cultural sphere and are familiar with international capital operations.

Li Ka-shing's Horizons Ventures and Richard Li's Pacific Century Group: Although Horizons Ventures had not yet been formally established at this time, the Li Ka-shing family's investment reach had already extended.

Li Ka-shing's operations in the capital market are renowned. Their representatives have also been trying to establish contact with Sheng Ying through various channels.

Taiwan's Fubon Financial Holdings and Singapore's Temasek Holdings' investment arm: these Asian financial giants will not miss this opportunity either.

The fifth category is industrial capital that intends to engage in cross-industry cooperation.

Some private industrial giants that have completed their initial capital accumulation and are looking for new growth points have also turned their attention to the cultural industry.

For example, some large private enterprise groups in Zhejiang and Jiangsu provinces had their bosses personally call or send people to Beijing to express their desire to "make friends with Mr. Wang and work together to expand the cultural industry."

The capital market's frenzied pursuit of Wang Sheng and Shengying Media truly exemplifies the saying, "When the winds of change blow, one can transform into a dragon."

(End of this chapter)