Chinese capital relaxes grip on foreign-owned nightclubs, entertainment spots and bars

China’s cabinet has removed a 49pc investment cap on foreign investors setting up entertainment venues in Beijing

PUBLISHED : Friday, 05 January, 2018, 8:34pm
UPDATED : Friday, 05 January, 2018, 8:33pm

China has drastically eased restrictions on foreign investments in entertainment venues including nightclubs, karaoke and sports bars in Beijing, giving residents in the capital city a wider access to world-class cultural products and leisure services.

In a circular to the Beijing municipal government, the State Council – or Chinese cabinet – scrapped the investment cap of 49 per cent for foreign investors applying to set up entertainment and performance venues in the city, a move that could allow them a freer play in the cultural sector where the government has until now, kept a tight grip.

Still, the relaxation comes with conditions – that the foreign-controlled entertainment businesses and the venues must be established in designated areas. No further details are available on the locations.

“The relaxation of the rule in Beijing is a fresh sign that top-class entertainment services are welcome,” said Gong Zhenhua, a partner at Shanghai Ronghe Law Firm. “The key question is whether the foreign businesses will be given access to the busiest streets or those developed regions in Beijing.”

The new rule was endorsed and published by the cabinet at the end of 2017, and became effective immediately. It remains unclear whether it will extend to other parts of the mainland.

In Shanghai, foreign investors were granted a widened access to the entertainment sectors after the city launched the country’s first free-trade zone in late 2013.

The key question is whether the foreign businesses will be given access to the busiest streets or those developed regions in Beijing
Gong Zhenhua, Shanghai Ronghe Law Firm

But not a single big international player has built a theatre, nightclub or large entertainment complex in the zone that is limited in geographical size.

When the Shanghai FTZ received the green light from the State Council to start operations in 2013, it had only a total area of 28.78 square kilometres. It expanded to 120 sq km in 2015, but was far from being a draw to the world’s leading entertainment service providers.

The US$5.5 billion Shanghai Disneyland, located outside the FTZ, is 57 per cent owned by the local government’s investment firm, Shendi Group, while the Walt Disney Company holds the remaining 43 per cent stake.

In Beijing, foreign investors have not been allowed to open entertainment developments such as nightclubs, without forming joint ventures with Chinese investors, who must own at least 51 per cent of the business.

Under the new rule, a foreign investor can technically set up its wholly-owned unit in Beijing to operate entertainment businesses.

He Jianmin, a professor at Shanghai University of Finance and Economics, said in an interview with the South China Morning Post earlier that the mainland’s rising middle-class has limited access to high-quality cultural products, no thanks to the country’s underdeveloped entertainment industry.