China's richest man about Chinese Soft Power

This article is a speech by Wang Jianlin, CEO of Wanda Group, given at the China Business Leaders Forum in Beijing on December 10th, 2016. An in-depth piece on China's new leading role in the world and the necessity of a Chinese soft-power.

Billionaire Wang Jianlin, chairman and president of Dalian Wanda Group. Justin Chin/Bloomberg via Getty Images

Wang Jianlin is a property magnate and China's wealthiest person. He is at the head of Dalian Wanda Group, a multinational conglomerate corporation and the world's biggest private property developer as well as the world's largest cinema chain operator, owning Wanda Cinemas, and the Hoyts Group as well as AMC Theaters.

In 2016, Wanda Group acquired Legendary Entertainment for $3.5 billion and Dick Clark Productions for around $1 billion. Furthermore, they announced a major partnership with Sony Pictures Entertainment, in which it will take minority investments in a number of upcoming releases.

"My topic today is “Chinese culture going out”, and I will talk about three points:

First, why go out?

1. Soft power conquers people.

Western economics divided national strength into hard power and soft power. Hard power - not difficult to explain - the economic, military and so on. What is soft power? Culture, education, sports, etc. Hard power can be conquered easily but not soft power.

I will give two examples. In the early Tang Dynasty (618–907), we had the least troops in all dynasties and Xi'an was the world's most prosperous city in the world. The Royal family had almost 40,000 staff, ten times more than our national orchestra. Why were people from around the world willing to come? Because of Tang Dynasty’s cultural development. We had many inventions and were willing to exchange ideas.

To give you a counterexample, the US troops reined in Iraq, Afghanistan and other countries in just a few years but the lasting effects in the area continues to today. No matter which leader and government come to the stage in Iraq or Afghanistan, the two countries are still a mess - living standards aren't getting better than before the war. The cultural conflict between Christianity and Islam can not be resolved with hard power like military; therefore, only soft power, like cultural exchange, can conquer and truly convince people.

2. Increase China's influence.

China has been declining in the past three centuries.The beginning of the reign of Qianlong (18th century) is a turning point for China. Some talk about, "Kangxi and Qianlong", meaning emperor Kangxi (1654- 1722) brought prosperity to China. Qianlong brought the fall of China. Since then, China's national strength gradually declined for three hundred years during the rise of Western powers. Due to the overall Western impact on China's culture, Chinese have adopted western lifestyles, forming a xenophilia atmosphere. To name a couple of specific phenomenons: no matter what Chinese people say, it won’t be as good as what foreigners say; no matter what award we receive, movie awards, music awards, and even literature prizes, as long as they are foreign, they are good. Chinese have a lack of confidence!

Now Chinese people put forward the slogan "to achieve nation’s great revival." In the past six hundred years, nine major developing countries rose to global powers. China’s revival will make it the tenth major rising power in the modern world. Although it will be the tenth rising power; we call China's rise “national revival " because we were once the greatest country in the world. Why is that? China has been in the world for more than two thousand years; we’ve just been going downhill in the past three hundred years, we are not a new rise, but rather, a revival. What is the most important thing for China to achieve in this national revival? The development of the economy and military, of course, but more importantly the development of Chinese culture. We must change the Western influence in China.

China now proposes to start national revival, building a moderately prosperous society. However, Chinese culture going out alone is not enough, the culture must also go out along with the hard powers, in order to truly achieve national revival.

3. Cultural self-confidence is the only way.

Now let’s talk about cultural self-confidence. Where does cultural self-confidence come from? We won’t have cultural self-confidence if we choose to close our national doors. How do we compare? Only through communication. Therefore, the only way to enhance cultural self-confidence is to allow Chinese culture to spread worldwide and compare it with other national cultures, and then absorb the essence, remove the dregs, improve ourselves, and gradually establish our own national cultural self-confidence. If Chinese culture doesn’t go out, the establishment of cultural self-confidence will be an empty talk. I remember that Mao Zedong once said that "Comparison provides identification, identification provides improvement."

Second, how to go out?

Chinese culture should go out, but how? I would like to make a few comments.

1. Establish communication channels.

First step is to have communication channels. We must first build high-speed rail lines, roads, infrastructures, and we must have railroads, highways, trains and cars. Now, as Chinese culture is spreading out, we find that film, television, network, media industries severely lack of channels outside. A vast majority of overseas places can not see or hear us. And please do not think Western media are completely objective.

The mainstream media must have its own values ​​and worldview - it will serve the world for the better. News about China are usually negative in foreign media. And where do people get information and knowledge? The media. Do you think China’s tourism industry can change the impression abroad? Well, yes it can, but rarely. That's why we want to establish a channel for the world to understand China.

I will give an example of how the films are sent out. There are countless film companies in the world. In the United States, there are more than 3,000 independent filmmakers, but only six companies have global distribution channels, they are known as the "Big Six." Some companies’ film and television revenue exceed the “Big Six’s” revenue, but we can not call these companies "big" because they do not have global distribution channels.

Can China rely on building our “Big Six” to achieve global distribution channels? The answer is definitely no. The number of Chinese film has doubled over the past three years, but Chinese films have basically not increase in overseas markets over the past few years. Why would that be? Overseas market doesn’t match with domestic market. Not until in 2012, when there were finally some Chinese films released in North America after Wanda bought AMC. We must realize the importance of global channels. Some Chinese films plan a premiere in Beijing or Shanghai, and call it the “global premiere.” Those are lies, they can’t be global distribution.

2. The need to build content brand.

In addition to having communication channels, another important thing is to have brand content. The U.S. have world’s best aircrafts and technologies, they not only have a strong economy but also a tough culture. American culture influences the world. The US cultural industry accounted for GDP 24%, came in first in the world and accounted for a quarter of the world's cultural industry. American culture does not only have strong channels but also famous brands, such as Oscar, Grammy, Disney, and even Kentucky, McDonald's. All of these brands created traditional American ideology and values that influence the world today.

To let Chinese culture go out, in addition to make every effort to build our own channels of communication, we must also build our own brand content. We need both global channels and strong brand content. If we do not build up the content of the brand, we will ultimately return to the origin no matter how much money, how many years we invest on Chinese culture.

3. Rely on private enterprises.

Of course, the government can bring our Chinese culture out to the world. The government should stand as the leading force of culture, there is no doubt about that, but it would require financial investment. The investment is limited and has no guarantee on its lasting resources. Therefore, it is difficult for the government to promote Chinese culture. In terms of depth, breadth and continuity, the government can only do long-term guidance.

Why is it difficult for state-owned enterprises to go out on behalf of the country? These state-owned enterprises can go abroad but can not pass approvals easily, especially in the more sensitive domain of culture, so I think it is more difficult.

The private enterprises are the main force to promote Chinese culture. We must rely on private enterprise culture to go out. Maybe not a lot people understand this concepts, but I believe that through years of practice, we will gradually unify the understanding. First, it’s easier to receive approvals abroad if we go out through private enterprises. For example, we acquired the British European cinema that went through more than 20 countries for approval, and we have received formal approval last week. If a state-owned enterprises went for this task, it may not be approved.

Moreover, a manoeuvre by private enterprises causes less resentment, more enlightenment. If we entertain people as we spread our culture, then people will accept the initiative and spend money cheerfully doing so. Abrupt propaganda will not work. Private enterprises take their own money to do it, and they want profitable revenues, so they would work hard to achieve others’ approvals and purchases. It may be easier for us to find a balance between the cultural greatness and the market, so that we can make Chinese culture become Chinese national treasure and more acceptable to foreigners.

From a long-term development strategy, private enterprises may have a loss in the first three to five years, and then gradually create revenues five to eight years later. It’s definitely difficult for state-owned enterprises to achieve this goal.

To give you an example, in 2006, as Wanda entered the film industry, we built a lot of Wanda Plaza. I said, let’s invest on films. My assistant told me that the country only had one billion box office. If only 20% of the box office created revenue, how much are we going to gain at the end? I answered that we would still try it because film industry always grows! I bet it will grow to 10 billion in 10 years, which means 2 billions of revenue, I said. Indeed, the company was at a loss in the first three years, but we caught up thanks to a relatively lucky period, that is, the golden years of Chinese film. Like some of our overseas cultural industry investment, we also need to be patient for China’s film industry to develop. Private enterprises have longer boss tenure, so the CEO will usually consider a more long-term strategy.

Third, policy recommendations

We talked about Chinese cultural development many years ago, but Chinese culture hasn’t gone out much. Well, it is certainly very difficult. I have three pertinent recommendations:

1. State should provide support

Chinese cultural enterprises now have a relatively small problem. There aren’t many companies that have a capital over ten billions dollars; Wanda is the only one in China. There are a bunch of foreign companies worths 20 billion, 30 billion dollars. Western countries call cultural enterprises, entertainment companies. These are basically the whole industry chain, the media, a few separate film companies, movies, television stations, etc. Everything is combined. So for us, it’s a large consortium competition. Without strong content brand and helpful governmental policies, it’s difficult to compete. Therefore, we need support from the state.

To give an example, I went to French Film Association and did a survey. France doesn’t have the world’s biggest economy, but why is French film industry ranked second in the world? The Cannes film festival is a world-class festival. Oscar has a strong reputation, but we forget Oscar is only two hours. France’s Cannes Film Festival is a one-week long holiday, the world's largest film festival, so French’s film festival also has a world-wide influence.

French have long recognized that, if the government doesn’t provide support to their own national film industry, the market will be filled with only English/American films. French government provides 50% of the investment, and if the film is a loss, then State subsidies part of the loss. French rely on this policy and some taxe reduction policies. If there is no Hollywood restrictions on the case, French usually make French-language movies. In fact, Germany, Spain, Japan and South Korea are following this model. With this preferential national policy, it is possible to spread culture quicker and better.

2. Relax on cultural enterprises’ regulations and policies

Just two weeks ago, we had a meeting to talk about Chinese culture going out. But I also heard that a new policy will reduce foreign investment. Business investment, manufacturing, cultural industry will now have to seek approval in order to proceed. I think this policy should treat cultural investment differently, as cultural negotiations are particularly complex and difficult things already.

Our acquisition of the EU Code began five years ago. I met the chairman of the European Code many times for our acquisition, but it didn’t happen until Brexit. When UK was part of EU, the chairman panicked. He was worried that the trend would change, so he wanted to quickly sell it. The mergers and acquisitions of cultural brands should be easier through governmental approvals. Otherwise, cultural development will be very difficult.

3. Build a culture of leading enterprises.

US film industry has more than 3000 enterprises, but only six companies have the real global competitiveness. There are more than 1,000 large-scale tourism enterprises in The US , but only two companies, Disney and Legend, have a real influence. This shows that in order to allow culture to influence the country and then the world, we must rely on leading enterprises.

We have an old saying, “Even if we have ten thousand small sampan, we still can not compete with an aircraft carrier.” That means, to allow Chinese culture to go out, the first step is to build leading enterprises. If China can cultivate over ten enterprises with an annual income above ten billions dollars, and two or three comprehensive cultural enterprises with thousands of billions dollars, then we can occupy the leading trench in worlds’ cultural exchange.

For the sake of time, that’s all for today. Thank you, everyone."

The following is Q & A session

Question: Recently, the US media reported that, 16 House Senators proposed to conduct a rigorous review of Wanda's acquisition of the US cinema. Can Chinese culture still go out? What should we rely on?

Wang Jianlin: This proves two things. First, this shows that we have some influence in the United States. The Congress did not nominate us for sanctions before, but now it feels that Wanda’s influence is getting bigger in America. This is the first reason.

More importantly, the second reason, the United States has a multi-party political system, and it has its own television and radio. t’s not difficult for congressman to write a proposal to against Wanda Group. Congressmen and Senators can write a letter together and then ask the people at the meeting to help sign on the proposal. I think that Congress is a place to talk, and sometimes it’s a place of nonsense talks. Congress has a different attitude acording to the US government, so I think we have to wait and see how Mr. Trump considers the Chinese cultural enterprises after taking the Oval Office.

I met the President of the Motion Picture Association yesterday. He told me that he was going to see Mr. Trump and asked me what I wanted to tell him. I said, tell him that I have invested $10 billion in the United States and have more than 20,000 employees. If Mr.Trump disapproves Wanda Group in the U.S. more than 20,000 people will lose their jobs. In the film and television industry, he must understand that films in english are growing in Chinese market.

Q: Wanda’s cast "Great Wall" is now online. What expectations do you have for the box office?

Wang Jianlin: You talk to me as if I was an entertainment entrepreneur, and you ask me a very specific questions. I don’t think I can answer you. I do not know the target they set or how much is expected. Honestly, I am not responsible for this, so I can’t say the expectation, but I believe it’s good.

China's film market seems to be declining a lot, but in fact it's not. It was an illusion, I said it last year. Film industry had more than 40% growth for the last three consecutive years; an economic growth of 6%, and cultural growth is even higher, more than 20%. A lot of films’ box office are injected by subsidies. But today I can certainly tell you, the Chinese movie industry has big year coming up. The authorities and the industry owners seriously thought about the next steps for Chinese film industry, so I believe next year we will hit a double-digit growth.

Q: Hello, Mr. Wang, you said earlier this year that due to Wanda’s existence, Disney in China wouldn't be profitable within 10 years, do you still hold this view? Disney was able to succeed, because it has been upholding a mission - hoping adults’ hearts were always living in goodness and innocence. But many people in China found difficulties to succeed in film or entertainment industries, so what can we learn from the Disney?

Wang Jianlin: I can’t believe you asked this question... I already reconciled with Disney! Didn’t you see me visit the Disney headquarters in the U.S., I also went to Shanghai Disney for a visit. We have a very close relationship now, but you are re-fueling the fire. This is not good, so I will not answer you this question.

However, I will answer your second question. Hollywood definitely wants to make money. Disney was suppressed by the Universal Studios a few years ago, but I expect it to become number one box office in the world this year.

Disney has one of the greatest features, a small number of films each year, about seven or eight, but the department has high box office. Disney has great animations and good stories. And Disney never partners with other companies because it produces its own IP image products, intellectual property, etc. Disney is not making money on the film; it relies on the films’ marginal effect, selling its smart IP products in stores only, not online. We should learn from them. Disney is able to deeply dig into people’s heart in order to create its animation IP image. But not every film by Disney is a success, in fact, the average success ratio of the global creation of the IP image is about 1/100, only 1/100 becomes successful! There are less successful global brands.

Q: In the current economic situation, what allowed Wanda to become successful?

Wang Jianlin: There is a dividing trench in China's economy in the last two years. We no longer have 9% or 10% GDP growth. Back then, 95% of enterprises had decent revenues, but now there is a phenomenon - differentiation, the Matthew Effect is stronger and stronger.

This differentiation is actually the inevitable result of competition when the economy develops to a certain stages. Wanda can stick with the industry because it’s able to maintain good growth. By 2016, we had an average annual growth rate of more than 35% over the past decade. It’s very rare to maintain such high rate of growth in the world, especially in such a large-scale development. Foreign business leaders often ask me how I did it; I thought about it, it's about innovation.

Always make one or two little steps earlier than the others. When everyone was doing real estate, I didn’t, and I transitioned into the film and television industry, tourism industry, sports industry. When no one is optimistic about Infront Sports & Media, we purchased it and slowly entered the sports field, landing a bunch of sports events next year in China. Our goal is to land ten to twelve world-class events, so that the sports company has work every month, and the revenue will come gradually.

It’s easy to be successful but hard to become excellent. To become excellent about things, do things other people don’t do. Don’t follow the crowd; if we all know how to succeed, how do you have a chance to stand out? Innovation is always the key. Why did we step on the most profitable rocks? Our analysis is that, the demand for tourism in China began to burst. Tourism industry needs further development, a suburban tour, travel abroad, and ultimately the development of high-end tourism like skiing. The highest consumption is football, that is, sports consumption. Innovation is the key word.

Q: I have two short questions, the first one is, entrepreneurs are most concerned about the sustainable development of enterprises, we feel Wanda has done very well, but what’s your intention on Wanda's successor? The second question is: will Wanda have a partnership with automobile industry?

Wang Jianlin: To answer your first question, I asked my son, he said he did not want to live my lifestyle. Perhaps young people have their own ideas, but I think we still have time to consider. Our company has a team of professional managers. Maybe it’s better to let professional managers look after Wanda. We have a number of professional managers who are capable of doing the job. We have five industrial companies under Wanda, and it’s likely that we pick one of the leaders from these companies to become the next successor. We will not be biased in this selection process. I think it’s better to select someone from competition instead of deliberately cultivate someone.

The second question is about whether Wanda will be associated with the automobile industry. If we build a car again, we can build everything! But actually, in a few days, we will support a few friends from the automobile industry, but I will be there only to support my friends. It does not mean Wanda's industrial policy shifts or automobile industry become our core services. Wanda is shifting from the real estate business to a service-oriented enterprises, and we will achieve this goal this year.

Q: I was the largest distributor of Disney this summer, the country established more than 1,000 channels, invested more than 40 million funds, including Ctrip. We invested almost everything everywhere, but we lost pretty badly. At that time, you said Disney was going to be a problem ...

Wang Jianlin: I did not say Disney must be a problem, your words are not accurate.

Q: I will just ask one question then, was your judgement about Disney based on your accumulated experience or the trend?

Wang Jianlin: If I published anything against Disney, it would be contrary to our friendship. We are all great companies, but Wanda has a unique feature in Chinese market. We often read martial arts novels Jin Yong and Liang Yusheng.These books are about martial arts skills, and all martial arts skills has feature: fast, so that we are doing fast. We use the wolves tactics.

Q: First of all, thank you very much, Mr. Wang for this speech. In a recently published article from the media, Wanda's liabilities reached 420 billion, "richest man" is actually the "largest debtor", do you have any comments?

Wang Jianlin: Looking so pretty but asking such harsh question... Usually I would skip this question, but I will answer you today.

Let me talk about some economics concepts. Let’s spread some knowledge today since you don’t know much about it.

The first question, who is in debt? I also read this article, saying I am in more than 400 billion debt. My assets was more than two hundred billion, so it sounded like I am in debt. But this concept is wrong. The so-called liabilities of more than 400 billion, I believe the articles was looking at our Wanda’s commercial earnings in the first half year of 2015 or 2016. That debt is Wanda commercial company's debt, not my personal debt, so the article was first wrong about that.

Second, I will talk about the concepts of assets and debt. The article didn’t mention the assets but only talked about liabilities. First of all, the debt is more than 400 billion, but what’s the number of assets? If the assets are almost the same as the liabilities, then the company is in danger; if the assets are less than liabilities, we really have a big problem. Wanda commercial in the first half of this year has not delisted yet, the open market information shows our assets is 690 billion. Let’s say when we have 700 billion assets, 400 billion liabilities, is it clear enough? The article only mentioned liabilities, but not our assets.

The third concept, real estate liabilities. Real estate liabilities are different from those of other industries. Real estate pre-sale, that is, the sales of the house is counted as debt. A lot of people who are not from financial sector don't understand. We have to wait until the house is completed in order get the certificate and later converted into revenues. So large-scale real estate companies will have more than 100 billion pre-sale count as debt. The articles said Wanda owed more than 400 billion bank loans, in fact, the writer was not clear about the concept of debt and loans. More than 400 billion debt refers to the advance housing investment to meet the project funds, reserves, etc.

The fourth concept, net assets. Let me talk about Wanda’s business. On June 30, 2016, I had a net income of 190 billion net assets. There are only two companies, Vanke and Wanda, who have this level of net assets in China. Wanda’s net assets will certainly exceed 200 billion at the end of this year. What is net worth? It is your assets after liabilities and budget. The money left is called net assets. If your company has more than 200 billion of net assets, is the company still poor? No! This is why we are delisting. There are still so many people flock to buy stuff when the price is 45 RMB.

The fifth concept, whether I am "negative" or "rich"? First of all, I do not show off, I also declared that regardless how wealthy I become at the end, the vast majority of my wealth will be donated to the community, and I will honor my promise, but now I still enjoy the process.

Wanda has more than 100 billion stake in the business. Now with Wanda Cinema, there are two listed companies. These two listed companies have about 150 billion shares. If you go find the bank's announcement and some financial reports, you will see I have no mortgage in the bank. Wanda and Wanda Cinema have no mortgage at all. If we are really short in money, then we will definitely use this stock to cash out a thousand million.

I spend so much time talking about this problem today, but I actually did not want to answer this question for a long time. But this report has been out for three days, and there are two possibilities that this reporter asked the question. The first possibility is that he really doesn’t know the concepts in financial sector; the second possibility he understands but the other doesn’t dare to ask about this debt, misleading people.

Q: One of the most efficient ways to let out of Chinese culture is to give our culture a deep label. We mention the United States’ Hollywood; in Japan we think of the animation industry; in Europe, we think of Renaissance or the luxury goods industry, and even in small country Korea, we think of Korean drama. What is the label of Chinese culture?

Wang Jianlin: China is the brand, but the era of cultural labels in China is still far. Because our culture itself accounted for only about 3% of GDP. Related industries are small and too spread out. There aren’t large companies to make large scale brands. The formation of cultural brand needs a long time to accumulate.

The United States has Hollywood; India has Bollywood, but it took 50 years to become so popular. It takes perseverance and strength to form a cultural brand.

But whether others companies persist or not, I can certainly tell you that Wanda will most likely play a leading role among Chinese cultural brands. Because we have these layouts. We first started with the channel layout instead of content layout. If we started with the content layout, we would have limitations on channels. There is a reason that we engaged in tourism. We now signed two projects with foreign companies, and you will know what they are all about when they are public.

This thing takes time; we need five to eight years or even ten years to build up the brand in the minds of consumers around the world.

No one gave me this task, the party did not give me this task, the people did not say anything. They didn’t tell me “you must do this thing quickly.” Wanda took the initiative to build Chinese cultural brand, and it’s Wanda’s historic responsibility.

Q: I have listened to your speech for three years, and it allowed me to become an entrepreneur from a debtor.

Wang Jianlin: That means I helped you.

Q: Very helpful! Everyone in our company buys the book "Wanda Work Style", I basically use your spirit every day. Your show "Speaking" had a great impact on me. You are the model for all of our businesses in China. If you have the opportunity, would you want to receive students as interns? What are your standards for students?

Wang Jianlin: You really raised a question I did not expect. It’s like a reality show; I am afraid it's not very good in China.

Q: I have done a thing. Yesterday we signed an agreement with CCTV Securities and Tencent video. I want to be a business apprentice, the Chinese version of the apprentice, like 1 + X, a mentor plus a Star tutor like you. Do you have the possibility to join this program? Because you love our entrepreneurs so much, and there is great sense of mission. If the program does a good job, it can inspire people.

Wang Jianlin: Your question comes with an invitation letter. I honestly do not know what your program is. If your show is so good, I might go, but I can not go every time. But if the program does not work, then please forgive me. Support does not necessarily mean I had to go to the show, funds is more realistic.

Q: If you receive any students, what are three criterias? What kind of person is qualified to become a Wanda’s successor?

Wang Jianlin: I have not thought about this issue, so I don’t know what standards I will have. When I want to receive students, I will talk about it.

Original article from Wanda group WeChat account. ID: guojiwanda