Michael’s Martini: China Currency Controls Stop $ to Paramount

China has been heralded over the last decade as a resource for financing, audience growth and untapped revenues.  In 2013, Chinese communist authorities added a ‘value-added’ tax to Hollywood studio revenues in a big surprise.

Recently China has been curtailing capital outflows with currency controls and other methods, recently hitting China’s foreign investments sector.

Even as Paramount struggles with a change in leadership, the studio’s much-ballyhooed deal to receive $1 billion of slate funding from two Chinese companies has hit a major road bump, encountering the same bureaucratic and financial difficulties that have recently slowed down other Chinese acquisitions and investments in Hollywood, sources close to the deal say.

The alliance with Shanghai Film Co. and Huahua Media would see the two Chinese firms invest in Paramount’s entire theatrical output over three years, including movies not granted a release in China. The pact was hatched last November and unveiled amid much fanfare in January.

But China’s new clampdown on money leaving the country is preventing the deal from moving ahead as scheduled. In particular, sources say, Shanghai Film Co., which is majority state-owned, is having trouble transferring its share of the first installment of the $1 billion from China to the U.S. because of the tightened capital controls. Whether that obstacle can be overcome is unclear.

Paramount’s Billion-Dollar Deal With Chinese Partners Hits Major Snag (EXCLUSIVE)